Question

f Microsoft sells copies of Windows in Japan and then uses the proceeds from the sale to buy bonds from the Japanese government, which of the following happens from the perspective of the U.S. ? a. Net exports increase and net capital outflow increases. b. Net exports decrease and net capital outflow decreases. c. Net exports decrease and net capital outflow increases. d. Net exports increase and net capital outflow decreases.

Answer 1

Answer: The answer is A. Net exports increase and net capital outflow increases.

Explanation: Net exports refers to the difference (in monetary terms) between a nation's exports and its imports over a certain time period.

For example, if a country exports $200 billion worth of goods and imports $185 billion worth of goods, in this case: exports > imports, then its net exported goods are $200 billion – $185 billion = $15 billion.

Net capital outflow (NCO) refers to the net flow of funds that is being invested in another country by a particular country during a certain period of time (usually a year).

Therefore the net exports has been increased when Microsoft sold windows to Japan, and Net Capital Outflow has also increased because an American company is investing in another country (Japan).

Answer 2

Net Exports Increase and net capital outflow increases.

Step-by-step explanation:

When Microsoft sells copies of Windows in Japan and then uses the proceeds from the sale to buy bonds from the Japanese government. From the perspective of the United States there is an increase in the net exports from the US, because copies of Windows which are a product of the US economy is being sold in Japan.

There will also be a net outflow of capital as a result of purchase of Japanese government bonds. The capital gained from the sale of copies of Windows is not returned to the US economy, but is rather invested in the Japanese economy.