Last year a country had exports of $85 billion, imports of $40 billion, and purchased $160 billion worth of foreign assets. What was the value of domestic assets purchased by foreigners?
A)$75 billion
B)$120 billion
C)$115 billion
D)$205 billion

Question

Quizplus · Accepted Answer

The net capital outflow is the difference between the purchase of foreign assets and the purchase of domestic assets by foreigners. The net capital outflow is equal to the trade balance, which is exports minus imports. Here, the trade balance is $85 billion - $40 billion = $45 billion. Since the country purchased $160 billion worth of foreign assets, the value of domestic assets purchased by foreigners is $160 billion - $45 billion = $115 billion.

Last Year a Country Had Exports of $85 Billion, Imports