Suppose, due to political instability, Mexicans suddenly choose to invest in U.S. assets as opposed to Mexican assets. Which of the following statements is true regarding U.S. net capital outflow?

The correct answer is c. U.S. net capital outflow is unchanged because only U.S. residents can alter U.S. net capital outflow.

Net capital outflow (NCO) measures the net flow of capital out of a country. It is defined as the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners. Since only U.S. residents (investors) influence NCO, investments made by Mexicans in U.S. assets do not directly affect U.S. net capital outflow. Thus, even though Mexicans are investing in U.S. assets, it does not change the NCO, which remains unchanged.