Question

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

a. True
b. False

Answer 1

a. True

Step-by-step explanation:

If country´s net export fall then country´s net capital outflow will also fall. As US is buying consumer goods from China worth $50 million and with same amount China is buying US bonds, which will pile up the debt of US. This will detoriate the ecomony of US and also increase the unemployliblity in the country. Trade deficit is a situation where export reduces than import in the country. Trade deficit lead to seveare job crisis in US, due to lost of job in manufacturing sector. China produces goods and services worth 17 trillion dollor every years.