Question

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

Answer 1

D. neither New Zealand’s net exports nor New Zealand’s capital outflow.

Step-by-step explanation:

Neither New Zealand’s net exports nor New Zealand’s capital outflow would increase because they are still using the US. dollars to buy the oranges.

However, If they were purchasing with their own local currency it would cause an increase.