Question

The financial account in the U.S. balance of payments includes: * a. new U.S. investments in...

The financial account in the U.S. balance of payments includes: *

a. new U.S. investments in foreign countries.

b. profits that Nissan of America sends back to Japan.

c. everything that is included in the current account.

d. payments of pensions to U.S. citizens who now live in foreign countries.

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Answer #1

Answer: a

BOP is the transaction between domestic country and foreign country in respect of trade and finance. It has three components – current account, financial account, and capital account.

Financial account involves change in ownership in between the domestic country and foreign country. Since there is new investment from domestic country to foreign country, it indicates acquiring foreign asset and ownership by the domestic country. Therefore, this is the correct choice.

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