A country has net capital outflow of $40 billion.Which of the following is consistent with this net capital outflow?
A)It has -$40 billion of net exports.
B)Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreign residents by $40 billion.
C)Its saving is $35 billion and its domestic investment is $5 billion.
D)All of the above are consistent with a net capital outflow of $40 billion.

Question

Quizplus · Accepted Answer

Net capital outflow represents the difference between domestic residents' purchases of foreign assets and foreign residents' purchases of domestic assets. Option B correctly states that purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreign residents by $40 billion, which results in a net capital outflow of $40 billion. Option A is incorrect because net exports represent the difference between exports and imports, not capital outflow. Option C is also incorrect because the amount of savings and domestic investment does not necessarily determine the level of net capital outflow. Option D is incorrect because option A and option C are not consistent with a net capital outflow of $40 billion.

A Country Has Net Capital Outflow of $40 Billion