Suppose that there is a balance of trade in both the United States and Canada. Then, the U. S. dollar appreciates against the Canadian

dollar. What would the likely outcome be?

a. a trade surplus in the United States

c. a trade deficit in both countries

b. a trade deficit in Canada

d. a trade surplus in Canada

D) A trade surplus in Canada

Explanation:

When the U. S. dolla appreciates, it gains value against the Canadian dollar. This makes U. S. goods more expensive, and Canadian goods cheaper.

American consumers now will find cheaper Canadian goods more attractive, and start importing them. This will lead to a trade surplus for Canada, and a trade deficit for the U. S.