If inflation in Canada is lower than inflation in other countries, what will be the effect on net exports for Canada?
A)Net exports will rise as Canadian exports increase.
B)Net exports will rise as Canadian imports increase.
C)Net exports will decrease as Canadian exports decrease.
D)Net exports will decrease as Canadian imports decrease.
E)Net exports will remain unchanged.

Question

Quizplus · Accepted Answer

If inflation in Canada is lower than inflation in other countries, Canadian goods and services become relatively cheaper, which makes Canadian exports more attractive to foreign buyers. As a result, net exports will rise, as more foreign buyers purchase Canadian goods and services, resulting in an increase in exports.

If Inflation in Canada Is Lower Than Inflation in Other