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Suppose a country's exports exceed imports, which of the following statements are true?This is a multi answer question. You can select one or more options as the answer.A.Net Capital Outflow is negativeB.Domestic Output exceed Domestic SpendingC.Domestic Saving exceed Domestic InvestmentD.Net Export is negative

Question

Suppose a country's exports exceed imports, which of the following statements are true?This is a multi answer question. You can select one or more options as the answer.A.Net Capital Outflow is negativeB.Domestic Output exceed Domestic SpendingC.Domestic Saving exceed Domestic InvestmentD.Net Export is negative

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Solution

If a country's exports exceed its imports, the following statements are true:

B. Domestic Output exceeds Domestic Spending: This is because the country is producing more goods and services than it is consuming domestically, allowing it to export the surplus.

C. Domestic Saving exceeds Domestic Investment: This is because the excess of exports over imports (a trade surplus) is equivalent to the excess of savings over investment.

Net Capital Outflow being negative (option A) and Net Export being negative (option D) are not true in this case. When exports exceed imports, Net Capital Outflow is positive (the country is a net lender in world financial markets) and Net Exports are also positive (representing a trade surplus).

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