Which two metrics are used to measure Foreign Direct Investment (FDI)?

Which two metrics are used to measure Foreign Direct Investment (FDI)?

• A. Flow and equity
• B. Flow and stock
• C. Stock and portfolio
• D. Inflow and outflow

Answer: (B)

Foreign Direct Investment (FDI) is commonly measured using two critical metrics: flow and stock. Flow refers to the amount of money invested in foreign assets over a specific period, typically measured annually. It represents the new investments that come into a country from abroad and can indicate trends in how attractive a country is to foreign investors within a given timeframe. Stock, on the other hand, represents the total value of foreign investments in a given country at a particular point in time. It reflects the cumulative value of FDI that has been made to date, encompassing all previous flows of investment. Understanding both flow and stock is essential for analyzing the overall impact of FDI on an economy. Flow provides insight into current investment trends, while stock gives a broader view of the economic relationships and commitments that have been established over time. The other options, while they may contain relevant financial concepts, do not encapsulate the most commonly accepted metrics used specifically for measuring FDI.

Foreign Direct Investment (FDI) is commonly measured using two critical metrics: flow and stock.

Flow refers to the amount of money invested in foreign assets over a specific period, typically measured annually. It represents the new investments that come into a country from abroad and can indicate trends in how attractive a country is to foreign investors within a given timeframe.

Stock, on the other hand, represents the total value of foreign investments in a given country at a particular point in time. It reflects the cumulative value of FDI that has been made to date, encompassing all previous flows of investment.

Understanding both flow and stock is essential for analyzing the overall impact of FDI on an economy. Flow provides insight into current investment trends, while stock gives a broader view of the economic relationships and commitments that have been established over time.

The other options, while they may contain relevant financial concepts, do not encapsulate the most commonly accepted metrics used specifically for measuring FDI.