Question

The balance on the financial account is A. equalsnet capital flows minus net foreign investment B. net capital flows equals capital inflows minus capital outflows. C. net foreign investment equals capital inflows minus capital outflows D. equals net foreign direct investment minus net foreign portfolio investment.

Answer 1

B) net capital flows equals capital inflows minus capital outflows.

Step-by-step explanation:

The financial account balance = net capital flows

net capital flows = capital inflows - capital outflows

where:

Capital inflows are all the foreign money that is introduced into a country's economy, e.g. foreign direct investment

Capital outflows are all the domestic money that leaves a country and is invested in a foreign country.