Canada sells machinery to a foreign company, which pays Canada with foreign currency. What happens to Canadian net capital outflow from this transaction? Group of answer choices It increases because Canada sells capital goods. It increases because Canada acquires foreign assets. It decreases because Canada acquires foreign assets. It decreases because Canada sells capital goods.

Canadian Net Capital Outflow from Foreign Transaction

The net capital outflow from a foreign transaction in Canada is determined by the amount of foreign assets acquired by the country versus the amount of capital goods sold to a foreign company. Generally, if Canada acquires more foreign assets than it sells capital goods, the net capital outflow increases. Conversely, if Canada sells more capital goods than it acquires foreign assets, the net capital outflow decreases.

Acquiring Foreign Assets

When Canada acquires foreign assets, the net capital outflow increases. This is because Canada receives foreign currency from the foreign company in exchange for its capital goods, which it can then use to purchase foreign assets. The money used to purchase these foreign assets is then counted as an outflow of capital.

Selling Capital Goods

When Canada sells capital goods to a foreign company, the net capital outflow decreases. This is because Canada receives foreign currency in exchange for the capital goods, but does not use it to purchase foreign assets. Instead, the money is counted as an inflow of capital.

Net Capital Outflow

The net capital outflow from a foreign transaction in Canada is determined by the balance between the amount of foreign assets acquired and the amount of capital goods sold. If Canada acquires more foreign assets than it sells capital goods, the net capital outflow increases. Conversely, if Canada sells more capital goods than it acquires foreign assets, the net capital outflow decreases.

Related Questions

• What are capital goods?
• What are foreign assets?
• What is a net capital outflow?
• What is the balance of payments?
• What are the effects of a foreign transaction?
• How does foreign currency affect Canadian net capital outflow?
• What is the difference between foreign assets and capital goods?
• How does the Canadian economy benefit from foreign transactions?
• What is the impact of foreign transactions on the Canadian dollar?
• What is the difference between net capital outflow and the balance of payments?