A U.S.firm has recently built a new textile factory in Malaysia. This falls under which component of the financial account?
A)Direct investment
B)Portfolio investment
C)Financial derivatives
D)Goods trade
E)Other investment

Question

Quizplus · Accepted Answer

Direct investment is when a foreign company builds or acquires a physical asset in another country, such as a factory. Therefore, the U.S. firm building a textile factory in Malaysia would fall under the direct investment component of the financial account. The other options (B) portfolio investment, (C) financial derivatives, (D) goods trade, and (E) other investment, do not apply to this scenario.

A USFirm Has Recently Built a New Textile Factory in Malaysia