When a firm builds a factory in a foreign market, this is recorded in the balance of payments as:

Question

Quizplus · Accepted Answer

When a firm builds a factory in a foreign market, it is considered a direct investment in that country. This is because the firm is investing in physical assets and likely intends to have a long-term interest in and control over the operations of the factory. This type of investment is recorded in the balance of payments as a direct investment asset for the country where the firm is based.

When a Firm Builds a Factory in a Foreign Market