Question

If foreign investors buy more U.S. stocks and bonds, how would that show up in the current account balance?

Short answer

When foreign investors buy more U.S. stocks and bonds, the income receipts increase.

Step-by-step solution

Step 1. Meaning of current account balance.

The current account balance is a broad measure of the balance of trade that includes trade in goods and services, as well as international flows of income and foreign aid.

Step 2. The feature in the current account balance.

When foreign investors buy more U.S. stocks and bonds, the income receipts increase. This increases because money is flowing into the United States and this increases the balance of trade.