A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Question

Quizplus · Accepted Answer

The transactions cancel each other out: the U.S. firm's purchase of apples increases New Zealand's net exports, but the subsequent purchase of oranges by New Zealand residents decreases it, resulting in no net change. Similarly, there is no net change in New Zealand's net capital outflow.

A US Firm Buys Apples from New Zealand with New Zealand