Consider only the flow of funds spent on acquiring assets. Which of the following is true if the U.S. has a net capital inflow of funds?
I. Foreign purchases of U.S. assets are greater than U.S. residents' purchases of foreign assets.
II. Foreign purchases of U.S. assets are less than U.S. residents' purchases of foreign assets.
III. There is a capital account surplus.
IV. There is a capital account deficit.

Question

Consider only the flow of funds spent on acquiring assets. Which of the following is true if the U.S. has a net capital inflow of funds? 
I. Foreign purchases of U.S. assets are greater than U.S. residents' purchases of foreign assets.
II. Foreign purchases of U.S. assets are less than U.S. residents' purchases of foreign assets.
III. There is a capital account surplus.
IV. There is a capital account deficit.

Quizplus · Accepted Answer

A net capital inflow means that more funds are flowing into the US from foreign purchases of assets than flowing out of the US from purchases of foreign assets by US residents. This corresponds to statement I being true. Additionally, a net capital inflow results in a capital account surplus, which corresponds to statement III being true. Therefore, the correct choice is A) I and III.

Consider Only the Flow of Funds Spent on Acquiring Assets