If net exports are negative, then
A)net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners.
B)net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans.
C)net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners.
D)net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

Question

Quizplus · Accepted Answer

Net exports represent the difference between exports and imports. When it is negative, it means that imports are greater than exports. Net capital outflow represents the difference between the amount of money invested abroad and the amount of money invested domestically by foreigners. Since net exports are negative, it means that foreigners are buying more American goods and services than Americans are buying foreign goods and services. Therefore, more money is flowing out of the country, which results in a negative net capital outflow. Hence, choice D is correct.

If Net Exports Are Negative, Then