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 if the effect of Canadian dollar appreciation dominates that of strong income growth in the U.S.?

Question

Quizplus · Accepted Answer

If the effect of Canadian dollar appreciation dominates that of strong income growth in the U.S., it means that the increase in the Canadian dollar's value will make Canadian exports more expensive for U.S. consumers, leading to a decrease in demand and a fall in net exports. Therefore, net exports must necessarily fall.

The USAnd Canada Are Major Trading Partners