Final answer:
When governments pool excess cash from multiple funds for investment, it is not called an 'internal fund' and investments are not reported solely in the General Fund. Income earned is allocated back to the contributing funds. This is separate from the international flow of financial capital, involving investments across borders.
Step-by-step explanation:
When governments place excess cash from multiple funds into a single investment pool, several outcomes are possible. It is important to understand that the government budget term appears with the supply of capital through the national savings and investment identity for the economy. This is represented by the equation S + (T-G) = I + (X-M), where S is domestic savings, T is taxes, G is government spending, I is investment, X is exports, and M is imports.
However, this question appears to address government financial management and accounting practices specifically. When governments consolidate funds for investment purposes:
- It is not typically referred to as an 'internal fund.' This term is ambiguous and not widely used in this context.
- The investments made by the pool are not all reported in the General Fund. The General Fund is usually for transactions related to the central government's day-to-day operations.
- Income earned on the investments is generally allocated back to the contributing funds based on their share in the pool or specific agreed-upon distribution formulas.
Such pooled investment mechanisms allow for efficient management of resources and can lead to enhanced interest income through the pooling of resources and investment in diverse financial instruments. This concept is distinct from international flows of financial capital, which involve investments across international borders in various forms such as real estate or stocks and bonds.