Which option contributes most positively to the U.S. balance of payments?

Which option contributes most positively to the U.S. balance of payments?

• A. U.S. corporations building plants abroad
• B. Foreign investment in the U.S.
• C. U.S. investment in foreign securities
• D. Lending money to foreigners at high interest rates

Answer: (B)

The contribution that positively affects the U.S. balance of payments is primarily through foreign investment in the U.S. When foreign entities invest in the U.S., they bring capital into the country, which is recorded in the financial account of the balance of payments. This influx of funds helps to strengthen the U.S. economy by providing resources for job creation, infrastructure development, and business expansion, which can lead to increased economic activity and growth. Moreover, foreign investment can create a favorable environment for trade by enhancing productivity and efficiency within American companies. It often results in greater technological transfer and expertise, benefiting the U.S. workforce. The overall positive impact on the U.S. economy from foreign investments helps to balance out any deficits seen in other areas, contributing to a healthier balance of payments. Other choices involve moving capital out of the U.S. or lending without the immediate influx of foreign resources, which would not enhance the balance of payments in the same beneficial way as foreign investment does.

The contribution that positively affects the U.S. balance of payments is primarily through foreign investment in the U.S. When foreign entities invest in the U.S., they bring capital into the country, which is recorded in the financial account of the balance of payments. This influx of funds helps to strengthen the U.S. economy by providing resources for job creation, infrastructure development, and business expansion, which can lead to increased economic activity and growth.

Moreover, foreign investment can create a favorable environment for trade by enhancing productivity and efficiency within American companies. It often results in greater technological transfer and expertise, benefiting the U.S. workforce. The overall positive impact on the U.S. economy from foreign investments helps to balance out any deficits seen in other areas, contributing to a healthier balance of payments.

Other choices involve moving capital out of the U.S. or lending without the immediate influx of foreign resources, which would not enhance the balance of payments in the same beneficial way as foreign investment does.