The U.S.and Canada are major trading partners.Suppose the Canadian dollar rises sharply in
Value against the U.S.dollar.At the same time, strong income growth in the U.S.increased the
Demand for Canadian exports.What happens to Canada's net exports as a result of these two
Events?

Question

Quizplus · Accepted Answer

The rise in the value of the Canadian dollar against the U.S. dollar would make Canadian goods more expensive for U.S. consumers, potentially decreasing demand for Canadian exports. However, the strong income growth in the U.S. would increase demand for Canadian exports. The net effect on Canada's net exports cannot be determined without information about the magnitude of the two events and how they interact with each other. Therefore, the effect on net exports is indeterminate.

The USAnd Canada Are Major Trading Partners