A U.S.purchase of oil from overseas paid for with foreign currency it already owned
A)increases U.S.net exports,and increases U.S.net capital outflow.
B)increases U.S.net exports,and decreases U.S.net capital outflow.
C)decreases U.S.net exports,and increases U.S.net capital outflow.
D)decreases U.S.net exports,and decreases U.S.net capital outflow.

Question

Quizplus · Accepted Answer

The purchase of oil from overseas decreases U.S. net exports (exports- imports). As the oil is paid for with foreign currency already owned by the U.S., there is no need to sell U.S. currency to purchase the oil, meaning there is no increase in U.S. net capital outflow (purchases of foreign assets- foreign purchases of U.S. assets). In fact, there may even be a decrease in U.S. net capital outflow if the transaction helps to reduce the amount of foreign currency held by the U.S., leading to less need to invest in foreign assets.

A USPurchase of Oil from Overseas Paid for with Foreign Currency