A U.S.bakery buys wheat from Canada and pays for it with US dollars.This transaction
A)increases Canadian net exports,and increases U.S.net capital outflow.
B)increases Canadian net exports,and decreases U.S.net capital outflow.
C)decreases Canadian net exports,and increases U.S.net capital outflow.
D)decreases Canadian net exports,and decreases U.S.net capital outflow.

Question

Quizplus · Accepted Answer

When the U.S. bakery buys wheat from Canada and pays for it with U.S. dollars, this transaction increases Canadian net exports because Canada is exporting goods (wheat) to the U.S. and receiving U.S. dollars in return. At the same time, this transaction decreases U.S. net capital outflow because the U.S. bakery is using U.S. dollars to purchase Canadian goods instead of investing or sending them abroad. Therefore, the best choice is B.

A USbakery Buys Wheat from Canada and Pays for It with with US