Question

In March 2009, the Canadian dollar was worth $0.78 U.S. dollars. In April 2011, the Canadian dollar was worth $1.06 U.S. dollars. What effect would this increase have on the trade balance between the United States and Canada? Canadian imports will rise and Canadian exports will fall, so the Canadian trade balance will fall and the U.S. trade balance will rise. Canadian imports will fall and Canadian exports will rise, so the Canadian trade balance will fall and the U.S. trade balance will rise. Canadian imports will fall and Canadian exports will rise, so the Canadian trade balance will rise and the U.S. trade balance will fall. Canadian imports will rise and Canadian exports will fall, so the Canadian trade balance will rise and the U.S. trade balance will fall. ReferenceseBook & Resources

Answer 1

Question

In March 2009, the Canadian dollar was worth $0.78 US dollars.

In April 2011, the Canadian dollar was worth $1.06 US dollars.

This means that in April 2011, one Canadian dollar can purchase more US goods relative to March 2009.

So, the imports of Canada from US will rise while exports from Canada to US will fall.

This will lead to fall in Canadian trade balance and the US trade balance will rise.

Hence, the correct answer is - Canadian imports will rise and Canadian exports will fall, so the Canadian trade balance will fall and the U.S. trade balance will rise.