When a U.S. firm sells a good abroad for, say, 100 euros (assume $1=1euro) , U.S. net exports increase by $100. These $100 in exports can be accounted for as $100 increase in capital outflow because ________.
A) If the 100 euros are kept in the foreign bank, the U.S. firm is giving a loan to that bank
B) If the U.S. firm uses the 100 euros to buy a share of stock in a foreign firm, the firm is supplying U.S. capital to that foreign firm
C) If the U.S. firm uses the proceeds to build a new factory in that country, it is supplying U.S. capital to that country
D) all of the above
E) none of the above

Question

Quizplus · Accepted Answer

All options describe scenarios where the U.S. firm is using the proceeds from exports to invest abroad, which constitutes capital outflow.

When a US Firm Sells a Good Abroad For, Say, 100 Euros