If C+I+GY, then net exports and net capital outflow are both less than zero.

Question

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

Quizplus · Accepted Answer

If C+I+G>Y, it means that domestic spending (C+I+G) is greater than domestic output (Y). This implies that there is a net import of goods and services (as the difference between domestic spending and output is made up by imports), leading to a negative value for net exports. Additionally, there is a net outflow of capital (as the excess domestic spending relative to output implies a need for foreign borrowing), leading to a negative value for net capital outflow. Therefore, both net exports and net capital outflow are less than zero.

If C+I+G>Y, Then Net Exports and Net Capital Outflow Are