The expansion of the Honda plant in Indiana represents which of the following?

Question

Suppose that Pfizer, a U.S. firm, purchases $1 million worth of laptop computers from Sony, a Japanese firm. The expansion of the Honda plant in Indiana represents which of the following?

Sony exchanges the $1 million at Tokyo Bank for 100 million yen. Tokyo Bank lends the $1 million to Honda Motor Company, which uses it to expand its automobile manufacturing facility in Indiana.

A. Japanese foreign portfolio investment in the United States

B. Japanese exports to the United States

C. Japanese imports from the United States

D. Japanese foreign direct investment in the United States

Answer 1

D. Japanese foreign direct investment in the United States

Extending capital for domestic production by foreign firm is foreign direct investment.