How is the adverse effect of the balance of payments for the home country due to FDI usually offset?
A) by increased imports to the home country as a result of the FDI
B) by the subsequent inflow of foreign earnings
C) by substituting direct exports made earlier from the home country
D) by further investments usually made to expand foreign operations

Question

Quizplus · Accepted Answer

For the home country, the balance of payments suffers from the initial capital outflow required to finance the FDI. This effect, however, is usually more than offset by the subsequent inflow of foreign earnings.

How Is the Adverse Effect of the Balance of Payments