A Canadian firm buys apples from New Zealand with Canadian currency. The New Zealand firm then uses this money to buy packaging equipment from a Canadian firm. How do these transactions affect net exports or net capital outflow?
A) They increase New Zealand net capital outflow and New Zealand net exports.
B) They increase New Zealand net exports but not New Zealand net capital outflow.
C) They increase New Zealand net capital outflow but not New Zealand net exports.
D) They increase neither New Zealand net exports nor New Zealand capital outflow.

Question

Quizplus · Accepted Answer

The transactions are balanced: New Zealand exports apples and imports packaging equipment, so there's no net change in exports or capital outflow. The money flows out and then back into New Zealand, leaving net exports and net capital outflow unchanged.

A Canadian Firm Buys Apples from New Zealand with Canadian