Question

In the 1990s and the first decade of the 2000s, investors from the Asian economies of Japan and China made significant direct and portfolio investments in the United States. At the time, many Americans were unhappy that this investment was occurring. In what way was it better for the United States to receive this foreign investment than not to receive it? In what way would it have been better still for Americans to have made this investment?

Answer 1

Answer: Answers follow in the explanation below:

Explanation:

In what way was it better for the US to receive this foreign investment than not to receive it?

This extra foreign investment made the stock of their capital larger. This made their capital stock more stable and safer, especially in a downturn. In turn this attracts potential investors (foreign and domestic) to the US' markets.

In what way would it have been better still for Americans to have made this investment?

If Americans made the investment themselves then they would have received the returns themselves, in the form of dividends, instead of the returns leaving the US economy and being paid out to foreign investors.