Question

In a small open economy, if exports equal $5 billion and imports equal $7 billion, then there is a trade ______ and ______ net capital outflow.

Answer 1

The answers are deficit and negative.

Step-by-step explanation:

According to Dictionary dot org, deficit means "the amount by which a sum of money falls short of the required amount. the amount by which expenditures or liabilities exceed income or assets. a lack or shortage; deficiency. a disadvantage, impairment, or handicap." In this case, the imports equal $7 billion while the exports equal $5 billion. Due to this, a negative net capital flow is created.

Answer 2

The answer is deficit / negative.

Step-by-step explanation:

A trade deficit is an economic measure of international trade in which a country's imports exceed its exports. A trade deficit represents an outflow of domestic currency to foreign markets.

Net capital outflow (NCO) is the net flow of funds being invested abroad by a country during a certain period of time (usually a year). A negative NCO means that the country invests outside less than the world invests in it.