Econ104 Exam 2 Flashcards | Quizlet ~ In-depth Info

Foreign Portfolio Investment (FPI) Foreign portfolio investment (FPI) refers to investing in the financial assets of a foreign country, such as stocks or bonds available on an exchange. This typeB) borrowing from domestic banks. C) the domestic government. D) the World Bank. 18. In a small open economy, if domestic saving exceeds domestic investment, then the extra saving will be used to: A) make loans to the domestic government. B) make loans to foreigners. C) repay the national debt. D) repay loans to the Federal Reserve. 19.20) If foreigners spend more on U.S.-made goods and services than we spend on theirs, A) foreigners must borrow from the United States or sell U.S. assets to make up the difference. B) all U.S. national saving remains in the United States C) we must borrow from foreigners because of low imports. D) funds flow in from abroad to help finance U.S.Foreign saving is used for domestic investment when foreigners engage in either foreign direct investment or foreign portfolio investment. To add, 'Foreign savings' and the 'net external resources inflows' are the two popular acronyms used for the current account deficit in the balance of payments.Net foreign investment (which is also referred to as net capital outflow) is the total amount of investment overseas done by people in the domestic economy minus the investment from people overseas in the domestic economy. Imagine that there is a world with only country A and country B who only have 1 asset each which […]

Solved > 11.If domestic saving is less than domestic

an increase in productivity Foreign saving is used for domestic investment when foreigners engage in foreign (direct/portfolio/either direct or portfolio) investment. either foreign direct investment or foreign portfolio investment. Suppose than an American opens and operates a recording studio in Poland.Any U.S. citizen with foreign bank accounts totaling more than $10,000 must declare them to the IRS and the U.S. Treasury, both on income tax returns and on FinCEN Form 114.Second, consider saving and investing over time. Today, the United States wants to invest more than it saves, so it borrows from abroad — foreign capital enters U.S. markets.Foreign direct investment can be used by international investors on both a macro and microeconomic level. Countries with sustainable and growing levels of foreign direct investment are preferable, while companies investing abroad can often benefit from higher growth rates.

PDF Chapter Question 5: Answer B should include government

rich countries, domestic entrepreneurs are already familiar with frontier technology and therefore do not need to attract foreign investment to innovate, so domestic saving does not matter for growth. A cross-country regression shows that lagged savings is posi-tively associated with productivity growth in poor countries but not in rich countries.The United States' government paper currently throws off little, if any meaningful yield for investors or savers. Accommodative monetary policies in the wake of the financial crisis that befell"Where an individual wishes to transfer more than R1 million abroad during a calendar year, such person would have to make use of their foreign investment allowance (FIA), as dealt with in theThis is how a foreign saving glut can expand credit in the United States, and this is why it might seem like the U.S. current account deficit is driven by domestic credit expansion rather than by excess foreign savings. In reality, though, the excess foreign savings result in domestic credit creation.When there is a current account deficit it means there has been more domestic currency flowing out of an economy to foreigners. Since this currency can't be used in any country other than the one it came from it naturally will be used in that country by foreigners, either in the form of investments/loans (bonds issued by the country of the currency's origin), or foreign direct investment.

What Is a Foreign Savings Account?

A foreign savings account is more like an investment account than conventional savings accounts for U.S. people. Foreign financial savings accounts allow you to invest your cash in a foreign money instead of the dollar. A foreign savings account will also be opened when you might be in a foreign country or via contacting a foreign financial institution on-line if it opens accounts that way.

Key Takeaways A foreign savings account is a kind of investment used by means of U.S. traders to speculate in a currency as opposed to the buck. Foreign financial savings account holders can benefit from curiosity and currency appreciation. Many foreign savings accounts have higher minimal deposits than conventional financial savings accounts. People with foreign financial savings accounts—those situated outdoor of the U.S.—are required to report the IRS form known as the FBAR.

How a Foreign Savings Account Works

Foreign financial savings accounts can have upper interest rates than in the U.S., which may make them appealing for savers keen to take the risk that the alternate fee will paintings in their choose. However, if the high-interest charge is coupled with the devaluation of the forex (as ceaselessly occurs with inflation) any features in curiosity shall be misplaced in foreign money trade.

Many foreign financial savings accounts have higher minimal deposits than traditional savings accounts. This manner extra of your cash is at risk. As neatly, there are almost all the time forex alternate charges related to converting between currencies. Opening a foreign account manner you could have to pay them twice—as soon as for changing from the buck right into a foreign foreign money, and as soon as to transform your a reimbursement to bucks.

These fees are usually priced as a proportion of the overall amount being transformed, which means that they may be able to take a large reduce out of the curiosity you earned. Be positive to factor in these charges when comparing what the foreign account would yield in comparison to a domestic account.

Special Considerations

People with foreign savings accounts—those located outside of the U.S.—are required to file the IRS form referred to as the FBAR. This is true whether you opened the account at a local bank in that country or at a neighborhood department of a U.S. bank, consistent with the Hong Kong department of Citibank.

Not filing the FBAR has steep consequences. You may also be fined as much as 0,000, or half the volume in the foreign account, whichever is larger. If you could have foreign accounts and are not sure about your tax status or which forms to file, it is price hiring an accountant to offer protection to your belongings.

If you are looking at this account as an investment, not a savings account, simply remember that you are going to be required to pay extraordinary source of revenue tax on any source of revenue you earn via curiosity or foreign money exchange—the same approach that you simply pay source of revenue tax on income from an American financial savings account. If you had made that cash by making an investment in the stock market, you might most effective owe capital good points tax to your profits.

Both of those tax charges vary relying to your tax bracket, but typically, capital good points tax charges are significantly less than bizarre income taxes—i.e. in the brand new 24% source of revenue tax bracket, for instance, you can likely pay 15% on long-term capital gains.

Advantages and Disadvantage of a Foreign Savings Account

There are plenty of reasons why an American might be interested in having a foreign savings account. Those living abroad may to find that opening an account in their country of residence makes it more straightforward to get right of entry to their funds and saves them money on bank and transaction charges.

Saving in any other foreign money works very best for those with a high tolerance for risk and the willingness to track change rates and transfer fast if essential. Currency markets are extremely risky, with values converting between 1% and 3% on reasonable every day. There is the possible for large positive factors in a foreign savings account, but there is additionally the potential for huge losses.

While there could also be some interesting reasons to entrust your financial savings to a foreign account, the U.S. inventory market additionally provides investments that earn greater than a domestic savings account, however without forex change charges. Additionally, you could simplest pay taxes on the capital gains fee, rather than on the peculiar income tax fee.

If you're looking for a safer place to save your cash and earn interest, imagine investing in a CD at a U.S. bank. CDs have a assured return on investment at a better interest rate than a conventional financial savings account and are FDIC-insured as much as 0,000 consistent with depositor.