Scribd
Upload
24 views2 pages

Assignment 3

Bill, a U.S. resident, purchasing software from a Japanese company decreases U.S. net exports and increases U.S. net capital outflow. This transaction counts as an import for the U.S., decreasing net exports. It also represents an outflow of capital from the U.S. to Japan in exchange for the software, increasing the net capital outflow. Therefore, the purchase negatively impacts the U.S. balance of trade but positively impacts Japan's.

Uploaded by

Phung Anh Do (K18 DN)
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
24 views2 pages

Assignment 3

Bill, a U.S. resident, purchasing software from a Japanese company decreases U.S. net exports and increases U.S. net capital outflow. This transaction counts as an import for the U.S., decreasing net exports. It also represents an outflow of capital from the U.S. to Japan in exchange for the software, increasing the net capital outflow. Therefore, the purchase negatively impacts the U.S. balance of trade but positively impacts Japan's.

Uploaded by

Phung Anh Do (K18 DN)
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

COURSE NAME: MACROECONOMICS(ECO121)

SEMESTER: FALL SEMESTER

CLASS: BA18B01

FULL NAME: Phùng Anh Đô

ROLL NUMBER: DS180286

I
n
d
i
v
i
d
u
a
l

A
s
s
i
g
n
m
e
n
t

3
(Topic: Open-Economy Macroeconomics: Basic Concepts)
Suppose that Bill, a resident of the U.S., buys software from a company in Japan.
Explain why and in what directions this changes U.S. net exports and U.S. net capital
outflow
ANSWER:
U.S. Net Exports:
Net exports refer to the difference between a country's exports and imports. In this
case, when Bill purchases software from Japan, it counts as an import for the U.S. This
means that the U.S. is buying a product from a foreign country, Japan, and this
transaction is recorded as a negative value in the U.S. balance of trade, which is part of
the current account in the balance of payments.Since Bill's purchase is considered an
import, it decreases U.S. net exports. The net exports balance will decrease by the
amount spent on the software, as it represents import item in the calculation of net
exports.
U.S. Net Capital Outflow:
Net capital outflow (NCO) refers to the net flow of a country's capital to and from
foreign countries. When Bill buys software from a Japanese company, he is essentially
sending money to Japan in exchange for the software. This financial transaction leads to
a capital outflow from the U.S. to Japan.U.S. net capital outflow will increase because it
reflects the increase in U.S. investment in foreign assets, in this case, the purchase of the
software, which is a foreign asset. This outflow of capital from the U.S. to Japan
represents the acquisition of a foreign asset, and it increases the U.S. net capital outflow.
In summary, when a U.S. resident like Bill buys software from a Japanese company, it
reduces U.S. net exports due to the import of the software, and it increases U.S. net
capital outflow because it represents an outflow of capital to pay for the foreign
asset .These transactions have implications for a country's balance of payments and its
overall economic position.

You might also like