When the U.S. dollar appreciates against the Canadian dollar, it means that U.S. goods become more expensive for Canadian consumers, while Canadian goods become cheaper for U.S. consumers. As a result, Canadian consumers are likely to buy fewer U.S. products, leading to a decrease in U.S. exports to Canada. Conversely, U.S. consumers are likely to buy more Canadian products due to their relatively lower price.
Given this scenario, the likely outcome would be:
C. a trade surplus in the United States.
The U.S. would see a decrease in exports and an increase in imports, possibly leading to a trade deficit; however, Canada would likely experience a trade surplus as they would export more to the U.S. due to their goods being relatively cheaper. Thus, the strongest implication here, based on the answer choices, is how this situation would affect trade balances.
1 answer