When an Australian exporter sells software to France and uses the proceeds to buy stock in a French company, Australian exports _____ and there is a capital _____ to/from Australia.[Fill in the blank]Single choice
A
a. increase; outflow
B
b. increase; inflow
C
c. decrease; inflow
D
d. decrease; outflow

Question

When an Australian exporter sells software to France and uses the proceeds to buy stock in a French company, Australian exports _____ and there is a capital _____ to/from Australia.[Fill in the blank]

BlackTom AI · Accepted Answer

Australian exports increase because the sale of software to France is an export of a service; the subsequent purchase of French stock with the proceeds is a capital outflow from Australia.

1) Relevant knowledge points and concepts
- Exports: goods and services sold by residents to foreign buyers increase the exports component of the balance of payments current account. A sale of software to a French buyer is an export of services from Australia.
- Financial (capital) account: purchases of foreign assets by domestic residents are recorded as capital outflows (a debit in the financial account). Conversely, foreign purchases of domestic assets are capital inflows.
- Double-entry bookkeeping of the balance of payments: an export generates a credit in the current account; if the exporter uses the foreign currency or proceeds to buy a foreign asset, that purchase shows up as a capital/financial account outflow.

2) Step-by-step reasoning
Step 1: Australian exporter provides software to a French purchaser → this is an export of services by Australia. Effect: Australian exports increase (current account credit).
Step 2: The exporter receives payment (foreign currency or via bank transfer) from France. Rather than converting and keeping funds in Australia, the exporter uses the proceeds to purchase stock in a French company.
Step 3: The purchase of foreign stock by an Australian resident constitutes an outflow of capital from Australia to France → recorded as a capital/financial account debit (capital outflow).

3) Intermediate logical steps (accounting view)
- Current account: + export (software) → increases exports.
- Financial account: − purchase of foreign asset by resident → capital outflow.

4) Why the correct answer is correct
Because the transaction has two distinct parts: (a) export of a service (raises exports), and (b) acquisition of foreign equity by an Australian resident (creates a capital outflow).

5) Why the other options are incorrect
- b (increase; inflow): incorrect because buying foreign stock is an outflow, not an inflow.
- c and d (decrease ...): incorrect because the export does not decrease exports; it increases them.

Conclusion: The correct choice is a. increase; outflow, which matches the provided answer.

When an Australian exporter sells software to France and uses the proceeds to buy stock in a French company, Australian exports _ and there is a capital _ to/from Australia.[Fill in the blank]Single choice

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When an Australian oil company purchases oil from Singapore and the Singaporean firm uses the proceeds from its sale of oil to Australia to buy Australian government debt, Australian _____ and there is a capital _____ to/from Australia.[Fill in the blank]

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