A U.S.firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S.dollars.New Zealand residents then use these dollars to purchase oranges from the U.S.Which of the following increases?
A)New Zealand's net capital outflow and New Zealand's net exports
B)only New Zealand's net exports
C)only New Zealand's net capital outflow
D)neither New Zealand's net exports nor New Zealand's capital outflow

Question

Quizplus · Accepted Answer

The transactions cancel each other out: New Zealand's purchase of U.S. oranges offsets the U.S. firm's purchase of New Zealand apples, so neither net exports nor net capital outflow for New Zealand increase.

A USFirm Buys Apples from New Zealand with New Zealand Dollars