A U.S.citizen buys bonds issued by an automobile manufacturer in Japan.Her expenditures are U.S.
A)foreign direct investment that increase U.S.net capital outflow.
B)foreign direct investment that decrease U.S.net capital outflow.
C)foreign portfolio investment that increase U.S.net capital outflow.
D)foreign portfolio investment that decrease U.S.net capital outflow.

Question

Quizplus · Accepted Answer

The scenario described is an example of foreign portfolio investment because the U.S. citizen is purchasing bonds in a foreign company. Since this investment involves money flowing out of the U.S., it would increase U.S. net capital outflow.

A USCitizen Buys Bonds Issued by an Automobile Manufacturer in Japan