Suppose Cavland's exports equal $400 billion and its imports equal $500 billion.
Foreigners purchased $200 billion worth of assets in Cavland. What is the value of
Foreign assets purchased by the citizens of Cavland?
A) $100 billion
B)-$100 billion
C) $300 billion
D) -$300 billion

Question

Quizplus · Accepted Answer

Cavland has a trade deficit of $100 billion (exports of $400 billion minus imports of $500 billion). To balance this, Cavland's citizens must have purchased $100 billion worth of foreign assets, as foreigners purchased $200 billion worth of assets in Cavland.

Suppose Cavland's Exports Equal $400 Billion and Its Imports Equal