Because Country X has a low inflation rate, a stable currency and unemployed resources, it receives $25 billion in direct foreign investment. What is most likely to be one positive effect of this foreign direct investment inflow on country X?
- AAggregate demand will be boosted through the investment multiplier.
- BCountry X will have to use its foreign reserves to eliminate any trade deficit.
- CThe balance of payments will be affected with the outflow of profits to foreigners.
- DThe rate of inflation will increase if country X tries to increase capacity.