If inflation rates rise, what will happen to the Canadian dollar according to the material?

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Multiple Choice

If inflation rates rise, what will happen to the Canadian dollar according to the material?

Explanation:
When prices rise, the currency tends to lose value because higher inflation erodes purchasing power and makes holdings in that currency less attractive. In Canada, if inflation climbs—especially relative to other economies—investors expect monetary policy to tighten to control the inflation. If those anticipated measures don’t fully offset the higher price level, demand for the Canadian dollar wanes and the currency weakens. So, the material suggests the Canadian dollar will weaken when inflation rises.

When prices rise, the currency tends to lose value because higher inflation erodes purchasing power and makes holdings in that currency less attractive. In Canada, if inflation climbs—especially relative to other economies—investors expect monetary policy to tighten to control the inflation. If those anticipated measures don’t fully offset the higher price level, demand for the Canadian dollar wanes and the currency weakens. So, the material suggests the Canadian dollar will weaken when inflation rises.

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