Final answer:
When an English company purchases a US confectionery manufacturer, the transaction involves payments to foreigners that are recorded in the US Current Account. This is part of trade in goods and services, distinct from the financial account which deals with investments in financial assets.
Step-by-step explanation:
When an English company purchases a US confectionery manufacturer, payments to foreigners flow into the US Current Account. This transaction is recorded in the current account because it involves the transfer of ownership of a company, which is considered a part of the trade in goods and services. The current account reflects the trade balance, as well as earnings on foreign investments and transfers, and is different from the financial account which records investments in financial assets across borders.
Examples of financial flows that would be recorded in the financial account include foreign investments in stocks and bonds (such as Japanese investors buying U.S. real estate), which represent capital flowing into the US economy. Conversely, when U.S. investors receive payments on their foreign investments (like the return paid on U.S. investments in Brazil), the money flows into the United States and is also part of the financial capital market trade.
This is because when an English company buys a US confectionary manufacturer, the payment is made from the English company to the US company, so it is a flow of payment to foreigners. And since it is a payment for a business transaction, it is categorized as a financial flow.