Suppose, due to political instability, Russians suddenly choose to invest in UK assets as opposed to Russian assets Which of the following statements is true regarding UK net foreign investment ?
Correct answer: C. UK net foreign investment falls
- A. UK net foreign investment is unchanged because only UK residents can after UK net foreign investment
- B. UK net foreign investment rises
- C. UK net foreign investment falls
- D. None of the above
Explanation
Net foreign investment equals domestic residents’ purchases of foreign assets minus foreigners’ purchases of domestic assets. Russian purchases of UK assets increase foreign claims on the UK, so UK net foreign investment falls.
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