A U.S.firm buys bonds issued by a technology center in India.This purchase is an example of U.S.
A)foreign portfolio investment.By itself it is an increase in U.S.holdings of foreign bonds and increases U.S.net capital outflow.
B)foreign portfolio investment.By itself it is an increase in U.S.holdings of foreign bonds and decreases U.S.net capital outflow.
C)foreign direct investment.By itself it is an increase in U.S.holdings of foreign bonds and increases U.S.net capital outflow.
D)foreign direct investment.By itself it is an increase in U.S.holdings of foreign bonds and decreases U.S.net capital outflow.

Question

Quizplus · Accepted Answer

The purchase of bonds by a U.S. firm in India is an example of foreign portfolio investment. By purchasing these bonds, the U.S. firm is increasing its holdings of foreign bonds, which leads to an increase in U.S. net capital outflow. Therefore, option A is the correct answer.

A USFirm Buys Bonds Issued by a Technology Center in India