Question

question 2 (1 point)
which of the following would increase the demand for canadian dollars in the fx market?
oil prices fall and international sales from the alberta tar sands fall dramatically.
canadian real interest rates rise above that of most other countries.
canadians double their imports while our exports remain unchanged.
the canadian inflation rate rises to the highest rate among our trading partners.

Explanation:

When Canadian real - interest rates rise above those of most other countries, foreign investors will want to invest in Canada to earn higher returns. To invest, they need to buy Canadian dollars, increasing the demand for Canadian dollars in the foreign - exchange (FX) market. Falling oil prices and reduced sales from Alberta tar sands would decrease export revenues and demand for Canadian dollars. Doubling imports while exports remain unchanged means more Canadian dollars are being supplied to buy foreign goods rather than an increase in demand for Canadian dollars. A high Canadian inflation rate relative to trading partners makes Canadian goods more expensive, reducing exports and demand for Canadian dollars.

Answer:

Canadian real interest rates rise above that of most other countries.