Hungary buys railroad engines from a Canadian firm and pays for them with forints (Hungarian currency). What happens to Canadian net exports and net foreign investment due to this transaction?
A) It increases both Canadian net exports and Canadian net foreign investment.
B) It decreases both Canadian net exports and Canadian net foreign investment.
C) It increases Canadian net exports and decreases Canadian net foreign investment.
D) It decreases Canadian net exports and increases Canadian net foreign investment.

Question

Quizplus · Accepted Answer

This transaction increases Canadian net exports because Canada is exporting goods (railroad engines) to Hungary. It also increases Canadian net foreign investment because the forints received from Hungary can be used by Canadians to invest in foreign assets, including those in Hungary.

Hungary Buys Railroad Engines from a Canadian Firm and Pays