Question

Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

A. A Swiss bank buys bonds issued by a U.S. company.

B. A French restaurant opens and operates a restaurant in New York.

C. A U.S. electronics company opens and operates a new factory in India.

D. A U.S. pension fund buys bonds issued by the Japanese government.

Answer 1

Option C. If an  U.S. electronics company opens and operates a new factory in India, then the Cash will decrease in U.S., because Cash Outflow happens from U.S.

Investment Comes to India, cash Flow comes in.