Does net exports has to do with borrowing and lending? In my course notes, it says that &quot;when net exports is negative it means that the country is borrowing from other countries&quot; but I do not get it if net exports is negative that only means that exports &lt; imports so net exports is negative, how does that relate to borrowing from other countries? or does it does assume that we traded our exports for imports instead of paying in cash?
Thanks in advance.
Edit : and I apologize if my question sounds stupid
Edit : the answer by @BB King on A country borrowing from the rest of the world did not help me , what i do not get exactly is how net exports component works and how it is calculated, ik that net exports = exports - imports and that we subtract imports for the fact that GDP is concerned only with domestically produced products so we subtract imports from consumption component (C-M) but we &quot;rearrange&quot; the formula of GDP and call (X-M) net exports (tho it's still the same formula), if i as citizen made some purchases online from other countries, that would be subtracted from GDP only cuz it's not domestically produced and if for some reason citizens of my country imported more than what they exported , XN becomes negative simply cuz of rearrangement of the formula so why does that mean my country owes other countries anything (citizens paid for everything out of their own pocket)?, what i am saying is that net exports component only exists cuz of the rearrangement of the formula so if NX is negative, it means M&gt;X , except if X,M are calculated with something like X = imports + amount of money borrowed from other countries, M = Exports + amount of money lent to other countries (of course I made those up , to explain my point of view)
Maybe this will help: imagine that trade is done in the currency of the foreign country.
Suppose you are American, you are standing on the border of Mexico, and you sell a hot dog to a Mexican for 20 pesos. Now you want to buy tacos from him, but you want 30 pesos of tacos. So he lends you 10 pesos, then you buy the tacos.
So X=20, M=30, and net exports= -10 and you borrowed 10.
Side note: some poor, risky countries (e.g. North Korea) can't have negative net exports, because no one will lend to them.