When the Bank of Canada Raises the Domestic Interest Rate

Multiple Choice

When the Bank of Canada raises the domestic interest rate to close an inflationary gap, it _____ the
_____ for/of Canadian assets by foreign investors. Under the flexible exchange rate system this, in turn,
Increases the _____ for/of Canadian dollars, resulting in an/a ______ of the Canadian dollar.

A) decreases; supply; demand; depreciation
B) increases; demand; demand; depreciation
C) decreases; supply; demand; appreciation
D) increases; demand; demand; appreciation