When a U.S. firm buys sardines from Morocco and pays for them with U.S. dollars, it represents an import for the U.S. The purchase of imported goods leads to a decrease in U.S. net exports.
Net capital outflow (NCO), on the other hand, refers to the net flow of capital out of the country. When U.S. dollars are used to pay for imports, it typically means that the dollars are being exchanged for foreign currency, which can lead to capital outflow if those dollars are then used by the foreign sellers.
In this case, after the transaction for imports:
- U.S. net exports decrease (because imports increase).
- The U.S. net capital outflow typically increases (because dollars paid to foreign sellers may flow out of the U.S. economy).
Therefore, the correct answer is:
b. decrease, and U.S. net capital outflow increases.
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