Asked by Jacob Matthews on May 05, 2024
Verified
If a country has Y > C + I + G, then it has
A) positive net capital outflow and positive net exports.
B) positive net capital outflow and negative net exports.
C) negative net capital outflow and positive net exports.
D) negative net capital outflow and negative net exports.
Net Capital Outflow
The difference between the domestic country's purchases of foreign assets and foreign investments in the domestic country over a specific period.
Net Exports
Net exports are the value of a country's total exports minus the value of its total imports, a key component in calculating a nation's gross domestic product (GDP).
- Examine the interconnection among domestic savings, domestic investments, and cross-border capital movements.
- Recognize the impact that changes in net capital outflow exert on a country's fiscal condition.
Verified Answer
DM
Diana MooreMay 11, 2024
Final Answer :
A
Explanation :
In an open economy, the national income identity is Y = C + I + G + NX, where Y is national income, C is consumption, I is investment, G is government spending, and NX is net exports. If Y > C + I + G, then NX must be positive, indicating positive net exports. Positive net exports imply that a country exports more than it imports, which corresponds to lending to the rest of the world or positive net capital outflow.
Learning Objectives
- Examine the interconnection among domestic savings, domestic investments, and cross-border capital movements.
- Recognize the impact that changes in net capital outflow exert on a country's fiscal condition.