Scenario: Happyland
Happyland is a country characterized by beautiful beaches, vast natural resources, and a highly skilled labor force. Happyland is now encouraging foreign direct investment flows. The country has been exporting textiles, computer hardware, and software programs. The net result of the 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 in attracting foreign direct investment,transactions involving those investments would appear in the country's ________ account.
A) capital
B) services
C) income payments
D) merchandise

Question

Quizplus · Accepted Answer

Transactions involving foreign direct investment would appear in the capital account of Happyland's balance of payments. The capital account records transactions related to capital transfers and changes in ownership of assets between residents and non-residents. Foreign direct investment involves the transfer of capital from a foreign-owned firm to a domestic-owned firm, making it a capital transfer and therefore recorded in the capital account.

Scenario: Happyland Happyland Is a Country Characterized by Beautiful Beaches, Vast Natural