If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Question

Quizplus · Accepted Answer

When the German firm buys U.S. goods, it increases U.S. net exports. The exchange of euros for dollars by the German firm represents a capital inflow to the U.S., which increases U.S. net capital outflow.

If a German Firm Buys Goods from a U