Which of the following will cause net exports to increase?
A)An increase in Canadian prices.
B)An increase in foreign prices.
C)A decrease in foreign incomes.
D)An appreciation in the Canadian dollar.

Question

Quizplus · Accepted Answer

An increase in foreign prices will make imports relatively cheaper compared to exports, thus increasing the demand for Canadian exports and causing net exports to increase.

Note: A and D will cause net exports to decrease as they make Canadian goods relatively more expensive compared to foreign goods. C may or may not affect net exports, as a decrease in foreign incomes could lead to a decrease in demand for Canadian exports, but it could also lead to a decrease in demand for imports, which would increase net exports.

Which of the Following Will Cause Net Exports to Increase