A U.S.firm opens a factory that produces power tools in Korea.
A)This increases U.S.net capital outflow and decreases Korean net capital outflow.
B)This decreases U.S.net capital outflow and increases Korean net capital outflow.
C)This increases only U.S.net capital outflow.
D)This increases only Korean net capital outflow.

Question

Quizplus · Accepted Answer

When a U.S. firm opens a factory in Korea, it is investing in foreign assets, which increases U.S. net capital outflow. Simultaneously, it decreases Korean net capital outflow because foreign investment is coming into Korea.

A USFirm Opens a Factory That Produces Power Tools in Korea