CHAPTER 4 - International flow of goods and capital

Which of the following both reduce net exports?

• exports rise, imports rise
• exports rise, imports fall
• imports rise, exports rise
• imports rise, exports fall

The value of the goods and services Australia purchases from the U.S. are greater than the value of goods and services the U.S. purchases from Australia.  The U.S. has

• positive net exports with Australia and a trade surplus with Australia.
• positive net exports with Australia and a trade deficit with Australia.
• negative net exports with Australia and a trade surplus with Australia.
• negative net exports with Australia and a  trade deficit with Australia.

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

• its trade surplus fell.
• its trade surplus rose.
• its trade deficit fell.
• its trade deficit rose

If  Saudi Arabia had positive net exports last year, then it

• sold more abroad than it purchased abroad and had a trade surplus.
• sold more abroad than it purchased abroad and had a trade deficit.
• bought more abroad than it sold abroad and had a trade surplus.
• bought more abroad than it sold abroad and had a trade deficit.

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

• $0
• $10 billion.
• -$10 billion.
• -$20 billion.

Net capital outflow is defined as the purchase of

• foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
• foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
• domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
• domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Net capital outflow

• is always greater than net exports.
• is always less than net exports.
• is always equal to net exports.
• could be any of the above.

If U.S. residents purchase $500 billion of foreign assets and foreigners purchase $1300 billion of U.S. assets, 

• U.S. net capital outflow is $800 billion;  capital is flowing into the U.S.
• U.S. net capital outflow is $800 billion; capital is flowing out of the U.S.
• U.S. net capital outflow is -$800 billion; capital is flowing into the U.S.
• U.S. net capital outflow is -$800 billion; capital is flowing out of the U.S.

If domestic residents of France  purchase  1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of  French assets, then France’s net capital outflow is 

• -0.3 trillion euros, so it must have a trade deficit.

• -0.3 trillion euros, so it must have a trade surplus.

• 0.3 trillion euros, so it must have a trade deficit.

• 0.3 trillion euros, so it must have a trade surplus.

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations.  Other things the same, these actions

• raise both U.S. net exports and U.S. net capital outflows.
• raise U.S. net exports and lower U.S. net capital outflows.
• lower both U.S. net exports and U.S. net capital outflows.
• lower U.S. net exports and  raise U.S. net capital outflows.