Question

True or false:

1) A country with negative net exports has a trade surplus.

2) When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.

3) By itself, when a Japanese bank purchases a bond issued by a U.S. corporation, U.S. net capital outflow rises.

4) By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

5) If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Answer 1

Question 1

A country with negative net exports has a trade surplus: False

‘A nation's net exports are the value of its total exports minus the value of its total imports. A positive net export number indicates a trade surplus, while a negative number means a trade deficit’.

Question 2

When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents: True

‘When the net capital outflow is positive, domestic residents are buying more foreign assets than foreigners are purchasing domestic assets but when it's negative, foreigners are purchasing more domestic assets than residents are purchasing foreign assets’.

Question 3

By itself, when a Japanese bank purchases a bond issued by a U.S. corporation, U.S. net capital outflow rises: False

Because, net capital outflow (NCO) is the net flow of funds being invested abroad by a country during a certain period of time, NCO rises when a country invests more on another country.

Question 4

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises: True

Because, net capital outflow (NCO) is the net flow of funds being invested abroad by a country during a certain period of time, NCO rises when a country invests more on another country.