<p>What you're describing is a change in the <a href="https://en.wikipedia.org/wiki/Capital_account">capital account</a>, not in GDP. They're related through the <a href="https://en.wikipedia.org/wiki/Balance_of_payments">balance of payments</a>, in that if a country is running a <a href="https://en.wikipedia.org/wiki/Current_account">current account</a> deficit (usually arising through being a net importer), they'll have a capital account surplus (i.e., foreigners will on net buy more domestic assets or domestic owners will be net sellers of foreign assets, or both), and vice-versa. So if you take foreign investment in domestic assets for example, it'll be <em>associated</em> with being a net importer, but it <em>does not appear directly</em> in the national accounting identity $Y=C+I+G+NX$.</p>

CC BY-SA 3.0
2015-04-13T22:26:28.333Z
Would purchases of new stock/bond issues come under consumption then?  The fact that they are considered a form of investment or saving does not matter in an economic sense, it is simply viewed as a good (and like most goods, they can be resold)?
Harkell
CC BY-SA 3.0
2015-04-13T22:31:47.857Z
No, they wouldn't be counted as consumption. They're not goods, they're financial assets (they're a claim to a stream of income). The fact that they're new issue securities is beside the point; given that existing debt securities are repaid over time, we'd expect that people would have to be constantly purchasing new issue securities even to maintain zero net saving in a closed economy.
dismalscience
CC BY-SA 3.0
2015-04-13T23:38:38.910Z
Ok, thankyou for clearing that up for me.
Harkell
CC BY-SA 3.0
2015-04-13T12:42:27.743Z
2015-04-13T12:42:27.743Z
dismalscience
<p>In the production function <strong><em>Y = C + I + G + NX</em></strong></p>

<p>Does foreign investment in domestic assets (<em>i.e. foreign buying of domestic bonds</em>) - and vice versa - come under the Net Exports variable? Which denotation does domestic investment in domestic assets come under? The Investment variable (I), one would think, however I seem to recall being told that the Investment variable does not include financial investment, so does it come under saving?</p>

<macroeconomics><gdp><production-function><saving><financial>
Financial investment in the composition of GDP
Harkell
# Financial investment in the composition of GDP

(Asked by: username_0 on 2015-04-12)

In the production function ***Y = C + I + G + NX***

Does foreign investment in domestic assets (*i.e. foreign buying of domestic bonds*) - and vice versa - come under the Net Exports variable? Which denotation does domestic investment in domestic assets come under? The Investment variable (I), one would think, however I seem to recall being told that the Investment variable does not include financial investment, so does it come under saving?

**Tags:** macroeconomics, gdp, production-function, saving, financial


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## 1 answers

### Answer by username_1 on 2015-04-13. Score: 5 | Accepted answer

What you're describing is a change in the [capital account](https://en.wikipedia.org/wiki/Capital_account), not in GDP. They're related through the [balance of payments](https://en.wikipedia.org/wiki/Balance_of_payments), in that if a country is running a [current account](https://en.wikipedia.org/wiki/Current_account) deficit (usually arising through being a net importer), they'll have a capital account surplus (i.e., foreigners will on net buy more domestic assets or domestic owners will be net sellers of foreign assets, or both), and vice-versa. So if you take foreign investment in domestic assets for example, it'll be *associated* with being a net importer, but it *does not appear directly* in the national accounting identity $Y=C+I+G+NX$.

> **Comments:**
> **username_0**: Would purchases of new stock/bond issues come under consumption then?  The fact that they are considered a form of investment or saving does not matter in an economic sense, it is simply viewed as a good (and like most goods, they can be resold)?  
> **username_1**: No, they wouldn't be counted as consumption. They're not goods, they're financial assets (they're a claim to a stream of income). The fact that they're new issue securities is beside the point; given that existing debt securities are repaid over time, we'd expect that people would have to be constantly purchasing new issue securities even to maintain zero net saving in a closed economy.  
> **username_0**: Ok, thankyou for clearing that up for me.  

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