Question

A U.S. firm opens a factory that produces power tools in Korea.
a. This increases U.S. net capital outflow and decreases Korean net capital outflow.
b. This increases only Korean net capital outflow.
c. This increases only U.S. net capital outflow.
d. This decreases U.S. net capital outflow and increases Korean net capital outflow.

Answer 1

Answer:

c. This increases only U.S. net capital outflow.

Explanation:

The net capitaloutflow is determinated by comparing the investemnt abroad with the investment of other countries in the national economy.

investment in foreing countries - investment from foreing countries.

In this case the US firm is investing abroad, therefore inceasing the net capital outflow of the US.

The Korea net capital outflow will decrease. because it is receiving investment.