Connie, a U.S. citizen, buys bonds issued by an automobile manufacturer in Sweden. 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.

Definitely C.
Connie is not a corporation/enterprise, so she cannot engage in foreign direct investments. This is exclusive to Corporations trying to make transnational corporations. FDI gives corporations access to subsides and tax breaks.
Since she is just on person, though she is directly investing in a foreign entity, this is merely a portfolio investment.
Since she is giving her money to a foreign body to use, this is a net capital outflow increase, as this money is no longer being used in the US to be spent in the US...
Connie is contributing to the current account deficit. Shame on Connie.
:)

Hope this helped.

C. It is portfolio investment because Connie has not personally constructed a factory in Sweden, and an outflow because the money is invested abroad.

Tags

　　Business Investment 　　Business financing 　　Business Invest 　　Business Debt 　　Bond Investment 　　Angel Funds 　　Alternative Investment

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