Suppose a resident of the USA buys a Jaguar car from SA, and the SA exporter uses the receipts to buy shares in Boeing.Which of the following statements is true from the perspective of SA?
A)Net exports fall, and net capital outflow rises.
B)Net exports rise, and net capital outflow rises.
C)None of these answers.
D)Net exports rise, and net capital outflow falls.
E)Net exports fall, and net capital outflow falls.

Question

Quizplus · Accepted Answer

The purchase of the Jaguar by the US resident counts as an export from SA, which increases net exports. The use of the export receipts to buy shares in Boeing counts as a capital outflow from SA, increasing net capital outflow. So, both net exports and net capital outflow rise.

Suppose a Resident of the USA Buys a Jaguar Car