Sia
Question
Statistics
Posted 8 months ago
What change will occur in the balance of payments accounts in Wakanda when it sells bonds to Hamsterville?
Choose 1 answer:
(A) Remittances increase
B Financial capital outflows increase
(c) Exports increase
(D) Financial capital inflows increase
(E) The financial account moves to a deficit
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Answer from Sia
Posted 8 months ago
Solution by Steps
step 1
Identify the economic transaction: Wakanda selling bonds to Hamsterville is a financial transaction that involves the transfer of financial assets
step 2
Determine the impact on balance of payments: When Wakanda sells bonds to Hamsterville, it receives money in exchange. This transaction is recorded in the financial account of the balance of payments
step 3
Analyze the direction of the financial flow: The money received by Wakanda from Hamsterville is an inflow of financial capital
step 4
Match the outcome with the answer choices: An inflow of financial capital to Wakanda increases the financial account balance, not a deficit or an increase in remittances or exports
Answer
D
Key Concept
Financial capital inflows increase when a country sells bonds to foreign investors.
Explanation
The sale of bonds to investors in another country results in an inflow of financial capital, which is recorded in the financial account of the balance of payments
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