I would really appreciate anyone's help on this.
My Book is trying to explain a concept, but it is confusing me more. This is basically how the book is describing it:
Bill Gates sells a copy of Windows to a Japanese Consumer for 5000 Yen. Suppose that Mr. Gates stuffs the 5000 Yen under his mattress. In this case, Mr. Gates has allocated some of his savings to an investment in the Japanese Economy, rather than to invest in the U.S. Economy. Thus, U.S. Saving exceeds U.S. Investment. The rise in U.S. Net exports is matched by a rise in the U.S. net capital outflow.
Now, what is confusing me is this: How is investment in the Japanese Economy (in the form of keeping the Japanese currency) leading to a rise in U.S. Savings. I understand why capital outflow would rise, but I don't get "how" U.S. Savings would exceed U.S. investment. How is 5000 in Yen currency U.S. Saving?
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haven't taken an economics course yet but I will need to in a couple of semesters, I can only hypothesize that the 5,000 Yen becomes a U.S. savings because the money is no longer circulating in Japan's local economy but it does have the potential to circulate in the U.S. once Bill Gates decides to exchange it into dollars. I live in Hawaii and many of my business professors tell me that our local economy is depended on foreign money such as japanese yen or korean won flowing into Hawaii. I travel alot and I always have to sign a waver claiming how much money I am brining with me into another country. The limit is 10,000 dollars, I asked one of my professors why? and he told me its because money leaving the country ruins the economy.