If the Canadian exchange rate were to appreciate and at the same time the GDP of our major trading partners were to increase,what would be the result?
A)Both exports and imports would fall so that net exports will increase.
B)Imports will increase but exports might increase or decrease so we cannot tell the effect on net exports.
C)Both exports and imports will increase and net exports will remain the same.
D)Exports will increase and imports will decrease so that there will be an overall increase in net exports.
E)Exports will decrease and imports will increase resulting in a decrease in net exports.

Question

Quizplus · Accepted Answer

An appreciation of the Canadian exchange rate makes imports cheaper and exports more expensive, potentially increasing imports and decreasing exports. However, an increase in GDP of trading partners could increase demand for Canadian exports. Thus, the effect on net exports is uncertain.

If the Canadian Exchange Rate Were to Appreciate and at the Same