A depreciation of the Canadian dollar is correlated with an

\"A depreciation of the Canadian dollar is correlated with an increase in the Canadian gross domestic product.\" Discuss whether this statement is Chapter 2 The Interest Parity Condition and the Exchange Rate true, false, or uncertain.

Solution

False.

There si negative correlation between depreciation of currency and GDP.

When currency depreciates, more amount has to be paid fr imports and less is received from exports. Net exports is a part of GDP. With increased payment for imports and less payments from exports, net exports fall and hence GDP falls.