A country's external wealth is equal to:

Question

BlackTom AI · Accepted Answer

When examining the concept of a country’s external wealth, we start by identifying what external wealth comprises. 
Option 1: its foreign assets minus its foreign liabilities. This matches the standard definition of net external wealth, i.e., the value of what the country owns abroad minus what it owes to foreigners. It directly captures the net position with the rest of the world. 
Option 2: the amount the country’s citizens have invested abroad. While this contributes to outward investment position, it is only a part of the larger picture and does not by itself define external wealth; external wealth considers the net balance of all claims and obligations between residents and nonresidents, not just residents’ investments. 
Option 3: its exports minus imports. This is the trade balance (also called the current account balance component), reflecting flow of goods and services, not the stock of external wealth. It does not quantify net claims or liabilities to foreigners. 
Option 4: its overall debt. Debt is a liability side measure and part of liabilities but external wealth requires subtracting liabilities from assets to yield net external position; treating debt alone as wealth is a mischaracterization of the concept. 
In sum, the correct framing of external wealth is the net of foreign assets and foreign liabilities, i.e., assets minus liabilities, rather than the other alternative measures that focus on flows or total indebtedness.

01:220:300:01 INTERNATIONAL ECON Introduction to international macroeconomics practice questions (not for credit)

A country's external wealth is equal to:

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