The Impact of International Trade on Guatemalan Economy
How does exchanging currency and purchasing goods affect a country's economy?
a. Increase net capital outflow and net exports
b. Decrease net capital outflow and net exports
c. Increase capital outflow and decrease net exports
d. Decrease net capital outflow and increase net exports
Answer:
The transaction decreases Guatemalan net capital outflow and increases U.S. net exports.
When a Guatemalan company exchanges its currency for dollars and uses the dollars to purchase goods from a U.S. company, it impacts both countries' economies.
The correct option is d. decrease Guatemalan net capital outflow, and increases U.S. net exports. This means that the transaction benefits the U.S. in terms of net exports while benefiting Guatemala by gaining access to quality goods.
Through this international trade, the U.S. is able to increase its net exports as it sells goods to Guatemala. On the other hand, Guatemala's net capital outflow decreases as it uses its funds to purchase goods from abroad. This transaction is a win-win situation as it stimulates economic activity between the two countries.