What does the term 'stock' refer to in the context of FDI?

In the context of Foreign Direct Investment (FDI), the term 'stock' refers to the total volume of FDI in a country at a specific point in time. This measurement provides a snapshot of how much investment is held in a host country, indicating the cumulative value of investments made by foreign entities that have established lasting interests and effective control over local enterprises.

Understanding stock is crucial for assessing the overall investment climate of a country, as it reflects past investment decisions and can influence future economic policies and strategies. It includes all past inflows of FDI minus any disinvestment, giving a comprehensive view of foreign holdings in the economy.

Other options define different aspects of FDI. The annual flow of FDI capital refers to new investments made over a specified period, often measured yearly, while profits earned from FDI relates to the income generated from those investments. The new FDI generated in a year specifically accounts for fresh capital inflows, emphasizing the timing aspect rather than the total accumulated investment, which is what stock captures.