If a US Corporation Purchases a Product Made in Europe and the and the European

question 83

Multiple Choice

If a U.S. corporation purchases a product made in Europe and the European producer uses the proceeds to purchase a U.S. government bond, then U.S. net exports ______ and net capital outflows ______.

• A) increase; increase
• B) increase; decrease
• C) decrease; increase
• D) decrease; decrease

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Definitions:

Net Income

The earnings a company retains after removing all expenses and taxes from its revenue.

Periodic Inventory Method

An accounting method where inventory value and cost of goods sold are determined at the end of an accounting period.

Beginning Inventory

The price of items up for sale at the onset of a fiscal period.

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities, representing the ownership interest of shareholders in a company.