A Turkish company exchanges liras for dollars and then uses the dollars to purchase medical equipment from a U.S.company.These transactions
A)increase U.S.net exports,and increase Turkish net capital outflow.
B)increase U.S.net exports,and decrease Turkish net capital outflow.
C)decrease U.S.net exports,and increase Turkish net capital outflow.
D)decrease U.S.net exports,and decrease Turkish net capital outflow.

Question

Quizplus · Accepted Answer

When the Turkish company exchanges liras for dollars to purchase medical equipment from a U.S. company, it increases U.S. net exports because the U.S. company is exporting goods. At the same time, the Turkish company's purchase of the medical equipment results in a decrease in Turkish net capital outflow because the company is importing capital goods (i.e., medical equipment) in exchange for its currency. Therefore, the correct answer is B - this transaction increases U.S. net exports and decreases Turkish net capital outflow.

A Turkish Company Exchanges Liras for Dollars and Then Uses