A Portuguese company exchanges euros for $60,000 from a U.S.bank.The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S.company.As a result of these two transactions alone
A)both U.S.net capital outflow and U.S.net exports rise.
B)U.S.net capital outflow rose and U.S.net exports fall.
C)U.S.net capital outflow fell and U.S.net exports rise.
D)both U.S.net capital and U.S.net exports fall.

Question

Quizplus · Accepted Answer

Both U.S. net capital outflow and U.S. net exports rise as a result of these two transactions. The Portuguese company exchanging euros for $60,000 from a U.S. bank is a capital inflow into the U.S., increasing U.S. net capital outflow. The subsequent purchase of $60,000 of canning equipment from a U.S. company is a U.S. export, increasing U.S. net exports.

A Portuguese Company Exchanges Euros for $60,000 from a U