An increase in US real GDP will:
A) have no effect on Canada's current account balance.
B) reduce the current account balance in the US and increase it in Canada.
C) increase the current account balance in the US and reduce it in Canada.
D) improve the current account balances in both countries.

Question

Quizplus · Accepted Answer

An increase in US real GDP typically leads to increased imports as consumers and businesses have more income to spend, which can reduce the US current account balance due to a higher import bill. Conversely, Canada, being a close trading partner, is likely to experience an increase in exports to the US, improving its current account balance.

An Increase in US Real GDP Will