Question

A Brazilian bank buys shares of stock in Intel, an American high-tech company. In the U.S. balance of payments, this transaction causes the balance on the _____ account to _____.

Answer 1

Capital; increase

Step-by-step explanation:

A foreign company purchased an American company, which means it will put more capital inside the US. There is an inflow of capital, from Brazil to the USA. This is called the capital account in the balance of payments. As there is more capital going to USA, the balance in this account will increase.

However, as the Brazilian company withdraws profits (or capital) back to Brazil, this will cause the capital account balance to decrease.