Question

Which of the following is an example of a capital outflow for the US? A. A...

Which of the following is an example of a capital outflow for the US?

A.

A domestic increase of assets held by foreign investors
B.

A reduction in US foreign asset holdings
C.

Unilateral transfers from foreigners
D.

A domestic decrease of assets held by foreign investors
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Answer #1

Capital outflow or the flight of capital is a situation when the foreigners start reducing the assets they are holding in the country and taking the hard cash back.

The answer is "D".

When the assets held by the foreigner increase it leads to a capital inflow it is a capital outflow for the foreign country. Similarly, when the US resident decreases the amount of capital held by them in the foreign nation it is capital inflow for the US. the unilateral transfer brings more money in the local economy and it accounts for inflows.

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