a.
Whether the United States over the period experienced net capital outflows in case the U.S.-owned assets abroad increased as a percentage of foreign GDP.
Introduction: Capital outflow refers to the flow of funds or the capital of a country outside to other foreign countries due to various economic or political reasons.
Explanation of Solution
The capital account of a country is the balance between the receipts of the country (US) when foreigners invest and the outflows when US owns assets in other countries.
The balance of capital account is surplus when there are inflows and in deficit when the capital account incurs greater outflows. Outflow from the capital account is a result from the assets abroad which are owned by the U.S. merchants.
Therefore, it will not be true to say that the increased level of US assets as a percentage of GDP abroad will always cause capital account outflows.
b.
The strength of link between the world economies in the year 1980 and 2016.
Explanation of Solution
As per the diagram, it can be observed that the gap between the two has increased. This increased gap represents a fall in the capital account balance and the net balance of capital flow increases.
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