A Country Has Net Capital Outflow of $40 Billion

question 103

Multiple Choice

A country has net capital outflow of $40 billion.Which of the following is consistent with this net capital outflow?

• A)It has -$40 billion of net exports.
• B)Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreign residents by $40 billion.
• C)Its saving is $35 billion and its domestic investment is $5 billion.
• D)All of the above are consistent with a net capital outflow of $40 billion.

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Definitions:

Direct Investment

The acquisition of a controlling interest in a foreign business by means such as purchasing a company in the target country or expanding operations of an existing business in that country.

Overseas Production

The manufacturing of goods in a country different from where the products are sold, often to take advantage of lower labor costs or other economic conditions.