If a Canadian corporation purchases a product made in Europe and the European producer uses the proceeds to purchase a Canadian government bond, then Canadian net exports _____, and net capital outflows _____.

Question

Quizplus · Accepted Answer

Canadian net exports decrease because the purchase of a European product is an import, which reduces net exports. Net capital outflows decrease because the European producer's purchase of a Canadian government bond represents a capital inflow into Canada.

If a Canadian Corporation Purchases a Product Made in Europe