What does the identity "net capital outflow = net exports" imply?
A)The supply of dollars equals the demand for dollars in the foreign-currency exchange market.
B)National saving equals domestic investment.
C)The volume of exports equals the volume of imports.
D)National saving is greater than domestic investment.

Question

Quizplus · Accepted Answer

The identity implies that the amount of capital flowing out of a country (net capital outflow) is equal to the net exports, which means the supply of a country's currency for foreign exchange (to buy foreign assets) equals the demand for that currency (to buy the country's goods and services).

What Does the Identity "Net Capital Outflow = Net Exports