If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods,which of the following increases?
A)Saudi Arabian net exports but not Saudi Arabian net capital outflow
B)Saudi Arabian net capital outflow but not Saudi Arabian net exports
C)both Saudi Arabian net exports and net capital outflow
D)neither Saudi Arabian net exports nor net capital outflow

Question

Quizplus · Accepted Answer

When Saudis use the proceeds from increased oil sales to buy foreign goods, the increase in exports is offset by an increase in imports, leaving net exports unchanged. Similarly, the net capital outflow remains unchanged as the capital inflow from oil sales is used to purchase foreign goods, balancing the capital account.

If Sales of Saudi Arabian Oil to the Rest of the World