Scenario: Happyland
Happyland, a country of about 48 million people with beautiful beaches, vast natural resources, and a highly skilled labor force, is encouraging foreign direct investment flows. The country has been exporting textiles, computer hardware, and software. The net result of trade is that Happyland exports far more goods and services and receives more income from abroad than it imports and pays abroad.
-If Happyland is successful at attracting foreign investment, its value would appear in the country's ________.
A) capital account
B) service account
C) income payments account
D) merchandise account

Question

Quizplus · Accepted Answer

Foreign direct investment flows would be recorded in the capital account of Happyland's balance of payments, as it represents investments in physical and financial assets. The service account refers to trade in non-physical services, the income payments account refers to payments for factors of production, and the merchandise account refers to trade in physical goods.

Scenario: Happyland Happyland, a Country of About 48 Million People with Beautiful