Question

A Chinese company exchanges yuan (Chinese currency) for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese Group of answer choices net exports increase, and U.S. net capital outflow increases. net exports increase, and U.S. net capital outflow decreases. net exports decrease, and U.S. net capital outflow increases. net exports decrease, and U.S. net capital outflow decreases.

Answer 1

In this international transaction, the Chinese company's purchase of scrap metal from the U.S. results in an increase in Chinese net exports and an increase in U.S. net capital outflow.

Step-by-step explanation:

When a Chinese company exchanges yuan for dollars to purchase scrap metal from a U.S. company, they are engaging in an international transaction that affects both countries' economic indicators. Specifically, the Chinese company's actions result in an increase in Chinese net exports, as they are exporting goods. Simultaneously, there is an increase in U.S. net capital outflow because the dollars that were exchanged for yuan are now being used to purchase goods from the United States, which is a capital outflow for the U.S.

The inflow of U.S. dollars to China, as payment for the scrap metal, represents foreign capital entering the U.S. economy. This transaction can lead to a depreciation of the U.S. dollar if it leads to an increased supply of dollars in the foreign exchange market. Depreciation would make U.S. goods cheaper and more competitive internationally, potentially increasing U.S. exports in other areas, but it can also have broader implications on trade balances and the economy.

Answer 2

Answer: Chinese net export decreases and U.S net capital outflow decreases.

Step-by-step explanation:

Net exports are the value of the total export of a country minus the value of the country's total imports. This means that:

Net exports= Total exports - Total imports

Net capital outflow is the net flow of funds that are invested abroad by a nation during a period of time. A positive net capital outflow implies that the country invests more outside than other countries invest in it.

From the question, we can denote that the Chinese company invests more outside. This will lead to an decrease in net exports since imports are more than exports. Also, the net capital outflow of the United States will decrease because the Chinese are the ones buying scrap metal from the United States.

Therefore, as a result of the transaction, the Chinese net export decreases while the United States net capital outflow also decreases.