Question

When the value of exports exceeds that of imports, which of the following is not true? Net capital outflows are positive. Domestic investment exceeds domestic savings Domestic saving exceeds domestic investment Net exports are positive

Answer 1

Net exports = Exports - Imports

Thus if the Value of exports > Value of imports, it implies that net exports are positive.

Capital outflow is nothing but the movement of assets of a country from the home country to other foreign countries.

Net capital outflow = (Capital Outflow - Capital Inflow)

If net exports are positive, it would mean that Capital Outflow >Capital inflow meaning that the net capital outflows will be positive.

Also, when the exports are greater than the imports it implies that people are buying less foreign goods and spending on exporting goods to foreign countries.

Thus, when the value of exports is greater than the value of imports, more and more investments are being made in the economy, less being saved and more is being produced and exported.

Thus, the 3rd Option - Domestic saving exceeds domestic investment is not true.

Thus, the 3rd option is the correct answer.