A citizen of Ethiopia uses previously obtained Canadian dollars to purchase lamb from Canada.What are the effects of this transaction?
A) It increases Saudi net capital outflow and increases Canadian net exports.
B) It increases Saudi net capital outflow and decreases Canadian net exports.
C) It decreases Saudi net capital outflow and increases Canadian net exports.
D) It decreases Saudi net capital outflow and decreases Canadian net exports.

Question

Quizplus · Accepted Answer

The transaction increases Canadian net exports because it represents a sale of Canadian goods to a foreign buyer. It also decreases Saudi net capital outflow because the Ethiopian citizen is using previously obtained Canadian dollars to make the purchase, rather than sending new capital to Canada.

A Citizen of Ethiopia Uses Previously Obtained Canadian Dollars to Purchase