How do each of the following transactions affect (1) the trade surplus or deficit and (2) capital inflows or outflows for the United States? Show that in each case the identity that the trade balance plus net capital inflows equals zero applies. LO1

a. A U.S. exporter sells software to Israel. She uses the Israeli shekels received to buy stock in an Israeli company.

b. A Mexican firm uses proceeds from its sale of oil to the United States to buy U.S. government debt.

c. A Mexican firm uses proceeds from its sale of oil to the United States to buy oil drilling equipment from a U.S. firm.

d. A Mexican firm receives U.S. dollars from selling oil to the United States. A French firm accepts the dollars as payment for drilling equipment. The French firm uses the dollars to buy U.S. government debt.

e. A British financial investor writes a check on his bank account in New York to purchase shares of General Motors stock (GM is a U.S. company).