If domestic residents of other countries purchase $600 billion of U.S.assets and U.S residents purchase $500 billion of foreign assets,then U.S.net capital outflow is
A)$100 billion and the U.S.has a trade surplus.
B)$100 billion and the U.S has a trade deficit.
C)-$100 billion and the U.S.has a trade surplus.
D)-$100 billion and the U.S.has a trade deficit.

Question

Quizplus · Accepted Answer

Net capital outflow is equal to domestic residents' purchases of foreign assets minus foreign residents' purchases of domestic assets. In this case, U.S net capital outflow would be $100 billion ($500 billion foreign assets purchased by U.S residents minus $600 billion U.S assets purchased by foreign residents), indicating that the U.S. has a net capital outflow and a trade deficit.

If Domestic Residents of Other Countries Purchase $600 Billion of U.S.assets