The Indirect Effect on Canadian Inflation of an Exchange Rate

question 131

Multiple Choice

The indirect effect on Canadian inflation of an exchange rate depreciation

• A) can sometimes offset the direct effect.
• B) reinforces the direct effect.
• C) can never offset the direct effect.
• D) is equal and opposite to the direct effect.
• E) is deflationary.

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Definitions:

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Interest Rate Collar

A financial derivative strategy used to hedge against interest rate fluctuations by setting upper and lower bounds on interest rates.

Variable Rate

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