What Impact Might a Decrease in the Canadian Federal Budget

Multiple Choice

What impact might a decrease in the Canadian federal budget deficit have on interest rates and exchange rates in the market for the Canadian dollar? (Assume the exchange rate is stated in terms of foreign currency per Canadian dollar.)

A) Interest rates and exchange rates increase.
B) Interest rates increase and exchange rates decrease.
C) Interest rates decrease and exchange rates increase.
D) Interest rates and exchange rates decrease.
E) Interest rates decrease and the exchange rate remains constant.