If a French company sells 1000 gallons of Perrier to a U.S.company at 5 euros per gallon,and uses the money to buy stock in a Spanish cork company,how does this affect the French balance of payments accounts?
A)Decrease in financial account; increase in merchandise trade
B)Decrease in merchandise trade; increase in financial account
C)Decrease in net investment income from abroad; increase in financial account
D)Decrease in merchandise trade; increase in net income from abroad

Question

Quizplus · Accepted Answer

The sale of Perrier (a good) to a U.S. company increases France's merchandise trade as it represents an export. Using the proceeds to buy stock in a Spanish company increases France's financial account, as it's an investment abroad.

If a French Company Sells 1000 Gallons of Perrier to a U.S.company