Which of the following is an example of U.S.foreign direct investment and by itself increases U.S.net capital outflow?
A)A Swedish bank buys a bond issued by the U.S.government.
B)A German company builds a car factory in the U.S.
C)A U.S.mutual fund purchases stock issued by a corporation in Bolivia.
D)A U.S.grocery chain builds and operates a new warehouse in Honduras.

Question

Quizplus · Accepted Answer

This is an example of U.S. foreign direct investment because the U.S. grocery chain is building and operating a new warehouse in Honduras. Additionally, this investment increases U.S. net capital outflow because money is leaving the U.S. to be invested in a foreign country. The other choices (A, B, and C) either do not involve direct investment by a U.S. company in a foreign country or do not necessarily result in a net increase in U.S. capital outflow.

Which of the Following Is an Example of U