Question

Many economists viewed the improvement in the American economy in 2016 as excellent news for Canada. In the United States, unemployment fell and average wages rose. Why would strong employment data from the United States bode well for the Canadian economy? O A. Because they indicate a growth in the American economy and, therefore, an increase in demand for Canadian exports. O B. Because Canada has decoupled from the American economy since the 2000s. O C. Because this indicates a slowdown in the American economy and, therefore, provides a competitive advantage in the world market to Canadian goods. OD. Because this causes a positive shift in the American aggregate supply and, therefore, decreases Canadian net exports.

Answer 1

Statement - Many economists viewed the improvement in the American economy in 2016 as excellent news for Canada. In the United States, unemployment fell and average wages rose. Why would strong employment data from the United States bode well for the Canadian economy?

Answer - A. Because they indicate a growth in the American economy and, therefore, an increase in demand for Canadian exports.

Explanation - The economies of USA and Canada, as are with many other neighbouring states, are coupled together strongly. Agreements like NAFTA and USCAME have further brought both economies close to each other. Majority of Canadian exports are sent to USA. In this case, if the American economy does well on the grounds of employment and average wage rise, it would further boost the demand for Canadian exports in USA, making it a good news for Canadian economy as well.