If a country has Y C + I + G, then it has

Question

If a country has Y > C + I + G, then it has

BlackTom AI · Accepted Answer

First, I’ll restate the scenario to ensure clarity: the condition is Y > C + I + G for the country. This relates to the national income identity in an open economy, where GDP (Y) can be decomposed as Y = C + I + G + NX, with NX representing net exports. Option A: positive net capital outflow and positive net exports. This aligns with the identity NX = NCO (net capital outflow). If Y > C + G + I, then NX must be positive (since Y exceeds domestic spending by C+I+G, the remaining is net exports). A positive NX implies a positive NCO as well. Therefore this option correctly reflects both a positive net capital outflow and positive net exports. Option B: positive net capital outflow and negative net exports. A negative net exports would make NX negative, which would disturb the given condition Y > C + I + G. Since the premise implies NX > 0, this combination is inconsistent with the scenario and thus incorrect. Option C: negative net capital outflow and positive net exports. Negative net capital outflow means a net capital inflow (NCO < 0). However, the identity NX = NCO would then force NX to be negative as well, contradicting the requirement that NX is positive due to Y > C + I + G. This option mislabels the direction of capital flow given the scenario. Option D: negative net capital outflow and negative net exports. This would indicate both NX < 0 and NCO < 0, which contradicts the condition Y > C + I + G that implies NX > 0. It also suggests the country is borrowing from abroad while running a trade deficit, which is inconsistent with the inequality provided. In summary, the given inequality Y > C + I + G directly points to a positive net exports (NX > 0), and through the national accounting identity NX = NCO, to a positive net capital outflow (NCO > 0). Hence, option A is the coherent choice, while options B, C, and D fail to satisfy the implied balance between exports and capital flows dictated by the condition.

2254 ECON 0103 SEC2020 ECON 103 Homework 5

If a country has Y > C + I + G, then it has

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