In response to high inflation in the United States, let us assume that the Federal Reserve...

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In response to high inflation in the United States, let us assume that the Federal Reserve...

In response to high inflation in the United States, let us assume that the Federal Reserve decides to tighten monetary policy to combat inflation, what will happen to the value of the Canadian dollar?

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Answer 1

Answer #1

If everything else remains constant, higher inflation will lead to depreciation of US Dollar against other currencies. Hence, the value of Canadian dollar will appreciate against the US Dollar.

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Answer 2

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