Suppose Connie, a Canadian citizen, buys bonds issued by an automobile manufacturer in Sweden. Which of the following would her expenditure be?
A)Canadian foreign direct investment that would increase Canadian net capital outflow
B)Canadian foreign direct investment that would decrease Canadian net capital outflow
C)Canadian foreign portfolio investment that would increase Canadian net capital outflow
D)Canadian foreign portfolio investment that would decrease Canadian net capital outflow

Question

Quizplus · Accepted Answer

Connie's purchase of bonds issued by a Swedish automobile manufacturer would be an example of Canadian foreign portfolio investment. This is because she is investing in securities such as stocks or bonds issued by a foreign company. Additionally, her investment would increase Canadian net capital outflow as she is investing in a foreign company and sending Canadian dollars to buy those bonds, which is a form of capital leaving the country.

Suppose Connie, a Canadian Citizen, Buys Bonds Issued by an Automobile