If Japan exports more than it imports,

Question

a. Japan's net exports are negative.
b. Japan is running a trade deficit.
c. Japan's net capital outflow must be positive.
d. Japan's net capital outflow must be negative.

Answer 1

If Japan exports more than it imports, the correct interpretation is:

c. Japan's net capital outflow must be positive.

Here's a brief explanation:

1. Net Exports: Net exports are calculated as exports minus imports. If Japan is exporting more than it is importing, this means net exports are positive.

2. Trade Deficit/Surplus: If a country exports more than it imports, it has a trade surplus, not a trade deficit. A trade deficit occurs when imports exceed exports.

3. Net Capital Outflow (NCO): This refers to the net flow of capital out of a country. When a country has a trade surplus (exports > imports), it typically has a positive net capital outflow because the excess foreign currency from exports can be used to invest abroad.

Thus, the correct conclusion is that Japan's net capital outflow must be positive if it is exporting more than it imports.