In the balance of payments, a foreign investor purchasing shares in a domestic company is recorded primarily as
Correct answer: B. A portfolio investment inflow in the financial account
- A. An export of goods in the current account
- B. A portfolio investment inflow in the financial account
- C. A transfer payment in the secondary income account
- D. A reduction in official reserve assets in the financial account
Explanation
The purchase of domestic shares by a foreign investor is a financial asset transaction and is recorded as portfolio investment in the financial account. It is not an export of goods or a transfer payment.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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