Suppose the majority of the shares of British Airways stock were sold to a firm in the United States.Assuming all else remains constant,this will
A)decrease the balance of the U.S.financial account.
B)decrease foreign direct investment in the United States.
C)decrease the balance of the U.S.current account.
D)increase net portfolio investment in the United States.
E)create a capital inflow in the United States.

Question

Quizplus · Accepted Answer

EWhen a firm in the United States buys the majority of shares of British Airways, it represents a capital outflow from the U.S. because funds are being used to purchase assets abroad. This transaction decreases the U.S. financial account balance, reflecting the outflow of capital. Additionally, it creates a capital inflow in the United Kingdom, not the United States, as the investment is going into a UK-based company. Therefore, it does not increase net portfolio investment in the U.S. or decrease foreign direct investment in the U.S. The current account, which includes trade in goods and services, primary income, and secondary income, is not directly affected by this transaction.

Suppose the Majority of the Shares of British Airways Stock