Question

When a U.S. oil company purchases oil from Saudi Arabia and the Saudi Arabian firm uses the proceeds from the sale to buy transportation services from the U.S., U.S. net exports __________ and the capital inflow to the United States __________.

Answer 1

When a U.S. oil company purchases oil from Saudi Arabia and the Saudi Arabian firm uses the proceeds from the sale to buy transportation services from the U.S., U.S. net exports remains same or constant and the capital inflow to the United States increased.

Step-by-step explanation:

• In Macroeconomics or International Trade,net export is mathematically calculated by subtracting the overall or total value of imports from the overall or total value of exports registered by any country or nation.
• In this case,the United States(US) first purchases or imports oil from Saudi Arabian firm and then the firm uses the same amount of money received from US for oil import to import transportation services from the US,which generates export revenue for the US.Therefore,following the export of transportation services to Saudi Arabian firm,the US receives export payment from the firm which increases its capital inflow from export of transportation services to the Saudi Arabian firm.
• However,since the firm uses the same amount of capital obtained from the US as payment for oil export to purchase transportation services from the US,the US net export does not change as the value of export and import for US are equal in this instance.