If Rhoda in Hungary buys candy from Matt in Maine for $20, and Matt buys foodin his favorite goulash restaurant in Hungary for $20, then the U.S. net exports:
A) and net capital outflow are both zero.
B) and net capital outflow both equal $20.
C) is zero and net capital outflow is $20.
D) equals $20 and net capital outflow is zero.

Question

Quizplus · Accepted Answer

The transaction between Rhoda and Matt only involves the exchange of goods and services (candy and food), and not the exchange of financial assets. Therefore, there is no net capital outflow. Since the value of exports ($20) equals the value of imports ($20), the net exports is also zero.

If Rhoda in Hungary Buys Candy from Matt in Maine