An open economy interacts with the rest of the world through its involvement in world markets for goods and services and world financial markets. Although it can often result in an imbalance in these markets, the following identity must remain true:

Net Capital Outflow ________________

Net export is the value of national goods and services that are sold abroad, less the value of foreign goods and services that are sold domestically. Net capital outflow is the acquisition of foreign assets by national residents, less the acquisition of national assets by foreigners. They are interconnected, since each of them assumes that each international transaction involves the exchange of an asset for a good or service, the outflow of capital will always be equal to net export in the economy.

An open economy interacts with the rest of the world through its involvement in world markets for goods and services and world financial markets. Although it can often result in an imbalance in these markets, the following identity must remain true: Net Capital Outflow ________________

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An open economy interacts with the rest of the world through its involvement in world markets for goods and services and world financial markets. Although it can often result in an imbalance in these markets, the following identity must remain true:

Net Capital Outflow ________________