Which component of the balance of payments addresses investments made by a country?

The financial account is the correct response as it specifically addresses investments and financial transactions between a country and the rest of the world. This account encompasses a variety of forms of investment, including direct foreign investment, portfolio investment, and other investment flows. It reflects how a country finances its operations and issues related to the movement of capital across borders, which is crucial for understanding its economic interactions with other nations.

The current account, while significant, focuses primarily on trade in goods and services, as well as income from investments and transfers. The capital account generally tracks the transfer of assets and liabilities but does not delve into the nitty-gritty of investments. The trade account is often considered part of the current account, specifically dealing with the imports and exports of goods. Therefore, the financial account is the specific component that captures the essence of a country’s investment activities on an international scale.