FOREIGN INVESTMENT

Credits in the financial account of the BoP

• increase a country's foreign liabilities.

• increase a country's foreign assets.

• are matched by equal credits in primary income.

• are matched by equal debits in primary income

Repayment of a foreign loan

• decreases foreign liabilities.

• is recorded as a debit in the financial account

• increases foreign assets.

• is recorded as a debit in primary income

If a payment to a foreigner is NOT wages, rent, interest or profit

• it is NOT recorded in primary income.

• it is recorded as a primary income debit.

Increased foreign direct investment in Australia's iron ore industry will be recorded as a

• debit in the current account.

• credit in the financial account.

• credit in the capital account

• debit in primary income.

One possible disadvantage of FDI is

• transfer pricing and tax avoidance.

• interest payments rising.

• the DSR rising.

• increased foreign ownership.

One reason direct investment may be prefered to portfolio is

• it fills the savings investment gap.

• it doesn't pose a threat to national sovereignty

• it doesn't create an outflow on primary income.

• it is more long term and stable.

Which of the following would most likely lead to an increase in the FD in the short term?

• An appreciation of the AUD.

• A fall in Australia's household savings ratio.

• A decrease in the size of a federal government budget deficit

• A fall in the size of the current account deficit.

The key benefit of foreign investment into Australia is

• it fills the savings investment gap.

• it reduces the CAD.

• it can involve technology transfer.

Australia welcomes foreign investment because

• its benefits exceed any possible costs.

• it fills the savings investment gap

• it enhances Australia's economic performance and has improved Australian's SoL.

Portfolio investment into Australia includes debt and equity securities. These equity securities

• give the foreign investor control of the Aust company.

• are purchases of less than 10% of the shares of a company.

• are mainly loans.

• add to Australia's overseas assets.