Question

If U.S. residents purchase $450 billion of foreign assets and foreigners purchase $575 billion of U.S. assets, then the U.S. has net capital outflows of -$125 billion and a trade deficit of $125 billion.a. True.b. False.

Answer 1

Answer:

False

Explanation:

Net capital outflows is the difference between purchases of foreign assets by US citizens and the purchase of US assets by foreigners.

Net capital outflows = $450 million - $575 million = - 125 million

It implies that foreigners spent more and US citizens spent less, this is a trade surplus.

Trade surplus occurs when exports exceeds import.