If rising incomes in the U.S. lead to greater sales and profits domestically, what is the most probable effect on investment flows?

Show Answers

A rise in portfolio investments directed toward the U.S.A decline in portfolio investments within the U.S.An increase in direct investments made in the U.S.A reduction in direct investments in the U.S.No significant change in investment patterns.

Explanation

When U.S. income growth boosts sales and profits, it tends to attract more direct investment into the country, as investors seek to capitalize on expanding business opportunities. This increase in direct investment is more likely than changes in portfolio investment, which are typically more sensitive to short-term financial market conditions.