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Define net export and net capital outflow.
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Explanation of Solution
The net export is the difference between the value of a country’s export and the value of a country’s import. It is also known as trade balance. The net capital outflow is the difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreigners.
The net export and net capital outflow are related to each other. That is, for an economy, net capital outflow must always be equal to the net export. Symbolically, it can be shown as NCO=NX.
Concept introduction:
Net export (NX): Net export refers to the additional value of export over the imports. It can be calculated by subtracting the imports from exports.
Net capital outflow (NCO): Net capital outflow refers to the purchase of foreign assets by the domestic residents minus the purchase of domestic assets by foreign peoples.
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Chapter 31 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
- a) Would each of the following transactions be included in net exports or net capital outflow? Be sure to say whether it would represent an increase or decrease in that variable. i) An Indian buys a Samsung TV ii) An Indian buys a share of sony stock iii) The sony pension fund buys a bond from the Indian government iv) A worker at a Toyota plant in Japan buys some Nagpur oranges from an Indian farmerarrow_forwardWould each of the following transactions be included in net exports or net capital outflow? Be sure to say whether it would represent an increase or a decrease in that variable. A Japanese buys some durians from a Malaysian farmer.arrow_forwardWhy are net exports and net capital outflow always equal? Derive the relation between savings,domestic investment, and net capital outflow using the national income accounting identity.arrow_forward
- 3. Net capital outflow and net exportsarrow_forwardWould each of the following transactions be included in U.S. net exports or in U.S. Net capital outflow? An American buys a Sony TV.b.An American buys a share of Sony stock.c.The Sony pension fund buys a bond from the U.S. Treasuryd.A worker at a Sony plant in Japan buys some Georgia peaches form an American farmer.arrow_forwardWould each of the following transactions be includedin U.S. net exports or in U.S. net capital outflow?Indicate whether it would represent an increase or adecrease in that variable.a. An American buys a Sony TV.b. An American buys a share of Sony stock.c. The Sony pension fund buys a bond from theU.S. Treasury.d. A worker at a Sony plant in Japan buys someGeorgia peaches from an American farmer.arrow_forward
- What is investment? How is it related to nationalsaving in a closed economy?arrow_forwardUnder a closed system, when net exports equals 0, what must be true about investment spending? A Investment Consumption B Investment = Savings (C) Investment = Government Spending D) Investment Government spending - taxesarrow_forwardWould each of the following transactions be included in net exports or net capital outflow? Be sure to say whether it would represent an increase or a decrease in that variable. A) A Malaysian buys a Sony TV. B) A Malaysian buys a share of Sony stock. C) The Japan pension fund buys a bond from the Malaysian treasury. D) A Japanese buys some durians from a Malaysian farmer.arrow_forward
- how is the balance of payments linked to national saving and investment? explain.arrow_forwardWhat are the benefits and costs associated with foreign portfolio investment (FPI)?arrow_forwardWhat does this graph show and what is the relationship between real exchange rate and net exports?arrow_forward
- Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage LearningEconomics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co
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