Final answer:
False
Net capital outflow is not always greater than net exports; they are equal by identity. A trade surplus means a net outflow of financial capital, while a trade deficit means a net inflow.
Step-by-step explanation:
Is net capital outflow always greater than net exports? The answer to this question is false. Net capital outflow (NCO) is the net flow of funds being invested abroad by a country over a certain period, typically a year. It is equal to the country's savings minus its domestic investment.
Net exports (NX), on the other hand, measure the value of a country's exports minus its imports. The relationship between net capital outflow and net exports is expressed in the national savings and investment identity, where NCO is equal to NX. This means that a trade surplus (where exports are greater than imports) will result in a net outflow of capital since the country is exporting more goods and services than it is importing, and vice versa for a trade deficit.
Therefore, it is not always the case that net capital outflow is greater than net exports; rather, they are equal to each other by identity. However, under certain circumstances, such as when a country aims to achieve a trade surplus while also maintaining a healthy inflow of capital, this can create conflicting forces within the economy, as a trade surplus typically means that financial capital is flowing out to purchase foreign assets.