Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?
A)both U.S. net exports and U.S. net capital outflow rise
B)both U.S. net exports and U.S. net capital outflow fall
C)U.S. net exports rise and U.S. net capital outflow fall
D)U.S. net exports fall and U.S. net capita outflow rise

Question

Quizplus · Accepted Answer

When U.S. citizens hold onto the rupees instead of spending them, it means that the U.S. is exporting more than it is importing, leading to an increase in net exports. Simultaneously, since the U.S. is not using those rupees to invest back into India, the net capital outflow from the U.S. also rises.

Citizens in India Buy Music from the U