If net exports are positive, then
A)net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners.
B)net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans.
C)net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners.
D)net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

Question

Quizplus · Accepted Answer

Net exports represent the difference between exports and imports, while net capital outflow represents the difference between the amount of capital that flows out of a country and the amount that flows in. If net exports are positive, it means that a country is exporting more than it is importing, so there is a surplus of funds. This surplus is invested in foreign assets, which means that net capital outflow must also be positive. Therefore, A is the correct answer.

If Net Exports Are Positive, Then