In a small open economy, if exports equal $15 billion and imports equal $8 billion, then there is a trade ______ and ______ net capital outflow.
A) deficit; negative
B) surplus; negative
C) deficit; positive
D) surplus; positive

Question

Quizplus · Accepted Answer

A trade surplus occurs when exports exceed imports, which is the case here ($15 billion in exports vs. $8 billion in imports). Positive net capital outflow is associated with a trade surplus, as the country is exporting more than it is importing, leading to an inflow of foreign currency that can be invested abroad.

In a Small Open Economy, If Exports Equal $15 Billion