From the national income identity:

Question

Quizplus · Accepted Answer

According to the national income identity, Y = C + I + G + NX where Y is national income, C is consumption, I is investment, G is government spending, and NX is net exports (which equals exports - imports). Rearranging this equation we get NX = Y - C - I - G, which is equivalent to NX = - (C + I + G - Y), where -(C+I+G-Y) represents net capital outflow (NCO). Therefore, NX = NCO, which means that the trade balance (NX) is equal to the net capital outflow (NCO).

From the National Income Identity