Answer:
a. The effect of the tea shipment from India:
Imports:
Direction of change? (increase, decrease, no change)
Magnitude of change = $1,500,000
b. Because of the identity equation that relates to net exports, the (increase/decrease?) in U.S. net exports is matched by (an increase/a decrease?) in U.S. net capital outflow.
c. Examples of how the United States might be affected in this scenario:
The Indian tea producer purchases $1,500,000 worth of stock spread out over a few U.S. companies.
The Indian tea producer hangs on to the $1,500,000 so that it can use the U.S. dollars to make investments.
Explanation:
The net exports identity equation "Net Capital Outflow = Net Exports" measures the imbalance between a country's exports and imports. It also measures the imbalance between the foreign assets bought by domestic residents and the domestic assets bought by non-resident foreigners.