Simple question I'm sure

CFA Level I Economics
#1

Question 14 of reading 17:

“because of sharp decline in real estate values, the household sector has increased the fraction of disposable income that it saves. If output and investment spending remain unchanged, which of the following is most likely?”

answer given: an increase in net exports and increased capital outflow.

I understand why the increase in net exports happen, but why increased capital outflow? Shouldn’t there be a decrease?

thanks!

#2

As Net Export is increasing, it means more domestic products are going out relative to the foreign goods coming in. Hence, there is an outflow of products (assets) to foreign countries and therefore, increase in Capital Outflow.

#3

Thanks Abh,

obviously Christmas celebrations were too good to me! Until you replied I was reading " increase in capital INFLOWS"… Apologies for the less than clever question.

cheers!