Th4.1: ^^ The Capital and Financial Accounts Flashcards
1
Q
Why is the capital account relatively unimportant?
A
it mainly records transfers of immigrants and emigrants taking money abroad or bringing to the UK, or government transfers such as debt forgiveness
2
Q
The financial account is more important and is split into three main parts:
A
foreign direct investment (FDI)
portfolio investment
other investments
3
Q
What is foreign direct investment?
A
the flow of money to purchase part of a foreign firm (10% more of the ordinary shares)
4
Q
What are portfolio investments?
A
the same thing as foreign direct investments but where they buy less than 10% of the company
5
Q
What do these ‘other investments’ include?
A
loans, purchasing of currency and bank deposits
