Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 31 - Part XI - Open-Economy Macroeconomics: Basic Concepts - Problems and Applications - Page 680: 3

Answer

Foreign direct investment is when an American company opens a plant or office in another country. (An example is a chain restaurant opening a new location in Canada.) Foreign portfolio investment is when an American buys stock in a foreign company.

Work Step by Step

Foreign direct investment is more likely to be done by companies and firms. Foreign portfolio investment is more likely to be done by individuals.
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