Asked by stanley kimutai on Jul 21, 2024
Verified
Colonial America had little industry and so had mostly raw materials to export. At the same time, there were many opportunities to purchase capital goods and earn a high rate of return because there was little existing capital so that the marginal product of capital was relatively high. What does this suggest about net exports and net capital outflow in colonial America?
Net Exports
The gap between what a country earns from exports and spends on imports.
Net Capital Outflow
The difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreign residents over a specified period.
Marginal Product
The increase in output that arises from an additional unit of input.
- Describe how domestic savings, domestic investments, and net exports are interrelated.
- Assess and recognize the ramifications when net exports match net capital outflow.
Verified Answer
ZP
Zamaphelo PreciousJul 22, 2024
Final Answer :
Net exports were negative because the value of exports was low, and the colonies imported capital goods. If net exports were negative, net capital outflow must also have been negative. Net capital outflow would have been negative because the colonies sold stocks, bonds, and other domestic assets to foreigners to buy capital goods.
Learning Objectives
- Describe how domestic savings, domestic investments, and net exports are interrelated.
- Assess and recognize the ramifications when net exports match net capital outflow.