If net exports are negative,
A)net foreign investment is also negative.
B)capital inflows must be less than capital outflows.
C)net foreign investment must be greater than public saving.
D)net foreign investment is positive.
E)Both A and B are correct.

Question

Quizplus · Accepted Answer

Net exports represent the difference between exports and imports. If net exports are negative, it means that a country is importing more than it is exporting. This results in a net outflow of currency to foreign countries. This outflow of currency is reflected in negative net foreign investment, which means that the country is investing more abroad than it is receiving from foreign investors. Therefore, choice A is correct. Choice B is incorrect because capital inflows can be greater than capital outflows if a country is borrowing from foreign investors to finance its imports. Choice C is irrelevant to the question.

If Net Exports Are Negative