When foreigners are making more "investments" in a country than the residents of the country are making abroad, which of the following is most likely to occur?

Question

Quizplus · Accepted Answer

If foreigners are making more investments in a country than its residents are making abroad, it means that the country is receiving more money from foreign investors than it is investing in other countries. This results in an imbalance in the balance of trade, where there is a surplus in the capital account (incoming investments) and a deficit in the current account (outgoing investments). Therefore, the correct answer is a balance of trade deficit (Option C). Inflation (Option A) and rapid growth of the money supply (Option B) are not directly related to this scenario. Negative net investment rate (Option D) is also not correct as there is still a net positive investment in the country, albeit from foreign sources.

When Foreigners Are Making More "Investments" in a Country Than