Problem : What identity describes both output and income?Y = C + I + G + NX
Problem : How do we calculate net exports?We calculate net exports by subtracting imports from exports.
Problem : If a country exports $300 worth of goods and imports $200 worth of goods, what is its net export?Net exports are $100 in this example.
Problem : What happens when net exports are negative?When net exports are negative, net foreign investments are positive as foreigners gain stock in domestic firms to pay for imports.
Problem : Would you expect a country that has few imports and many exports to have much foreign investment?A country with few imports would likely have a significant amount of interest in other foreign countries, but little foreign investment in the country.
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