Question

If U.S. net exports are negative, then net capital outflow is?

1) Positive
2) Negative
3) Zero
4) Cannot be determined

Answer 1

If U.S. net exports are negative, net capital outflow is positive.

Step-by-step explanation:

If U.S. net exports are negative, then net capital outflow is Positive. Net exports represent the difference between exports and imports of goods and services, while net capital outflow represents the difference between capital inflow and outflow. When net exports are negative, it means that the value of imports is greater than the value of exports, indicating a trade deficit. This implies that more money is flowing out of the country to pay for imports, resulting in a positive net capital outflow.