A U.S. firm buys wool from Australia with U.S. currency. The Australian firm then uses this money to buy electric shears from a U.S. firm. Which of the following increases?
A)Australian net capital outflow and Australian net exports
B)only Australian net exports
C)only Australian net capital outflow
D)neither Australian net exports nor Australian capital outflow

Question

Quizplus · Accepted Answer

The transaction does not affect Australian net exports or net capital outflow because the money received from the wool sale is used to purchase goods from the U.S., balancing the trade.

A US Firm Buys Wool from Australia with U