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.

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Business

Trevor

21 March, 08:21

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.

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Felix · Answer 1

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.