Question:
Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?
A. A Swiss bank buys bonds issued by a U.S. company.
B. A French restaurant opens and operates a restaurant in New York.
C. A U.S. electronics company opens and operates a new factory in India.
D. A U.S. pension fund buys bonds issued by the Japanese government.
Net Capital Outflow:
Net capital outflow is the difference between capital outflows and capital inflows. Capital outflows refer to the domestic residents buying foreign assets, whereas capital inflows refer to the foreigners buying domestic assets.
Answer and Explanation:1
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Option C is the correct answer. From the perspective of the United States, net capital outflows refer to the difference between purchases of foreign...
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