What does FDI stand for?
A) Financial Data Information
B) Foreign Debt Investment
C) Foreign Direct Investment
D) Fixed Deposit Investment
Which of the following is a characteristic of Foreign Direct Investment (FDI)?
A) It involves the purchase of stocks in a foreign country
B) It involves the establishment or expansion of a business in a foreign country
C) It involves the lending of money to foreign governments
D) It is limited to short-term capital flows
Which of the following is a benefit of FDI for the host country?
A) Loss of control over local businesses
B) Increased capital inflows, technology transfer, and employment opportunities
C) Reduced foreign competition
D) Complete control over the economy by foreign firms
What is the primary reason multinational corporations engage in Foreign Direct Investment (FDI)?
A) To avoid foreign competition
B) To access cheaper labor and resources in foreign countries
C) To manipulate foreign exchange rates
D) To reduce taxes in their home country
Which of the following is an example of Foreign Direct Investment (FDI)?
A) A company purchasing shares of another company in a foreign country
B) A company building a new manufacturing plant in a foreign country
C) A company lending money to a foreign government
D) A company trading currencies in the foreign exchange market
FDI can lead to the transfer of:
A) Only financial capital
B) Only human resources
C) Technology, skills, and managerial expertise
D) Only physical goods
Which of the following is a potential disadvantage of Foreign Direct Investment (FDI) for the host country?
A) Enhanced foreign competition and reduced local market share
B) Technology transfer to local firms
C) Creation of new jobs
D) Strengthened infrastructure development
Which of the following is a source of Foreign Direct Investment (FDI) for a host country?
A) Domestic savings from local citizens
B) Investment from foreign governments, corporations, and individuals
C) Borrowing from international banks
D) Domestic government funds
How does FDI affect the balance of payments of the host country?
A) It leads to a reduction in foreign exchange reserves
B) It improves the host country’s current account balance by attracting capital inflows
C) It negatively affects the host country’s capital account
D) It has no effect on the host country’s balance of payments
Which of the following is an example of inward FDI?
A) A foreign company establishing a factory in your country
B) A local company investing in a foreign country
C) A local bank issuing bonds in a foreign market
D) A foreign government investing in your country’s currency
Which factor does NOT typically influence the flow of Foreign Direct Investment (FDI)?
A) Political stability in the host country
B) Availability of natural resources
C) Exchange rates between countries
D) Cultural and linguistic ties between countries
What does “greenfield investment” refer to in the context of FDI?
A) Investment in government bonds
B) Investment in an existing company
C) Investment in new facilities and operations in the host country
D) Investment in financial securities
Which of the following is a key risk associated with Foreign Direct Investment (FDI)?
A) Excessive capital inflows
B) Political instability and changes in government policies
C) Inflationary pressure
D) Reduction in consumer demand
How does FDI benefit the home country of the investor?
A) By increasing unemployment
B) By promoting the development of local businesses
C) By gaining access to new markets, resources, and cheaper labor
D) By reducing the level of foreign competition
Which of the following is NOT a type of Foreign Direct Investment (FDI)?
A) Mergers and acquisitions
B) Greenfield investments
C) Portfolio investment
D) Joint ventures
What is the impact of FDI on employment in the host country?
A) It generally reduces employment due to automation
B) It generally increases employment by creating new jobs in various sectors
C) It has no effect on employment
D) It leads to a decline in employment in the service sector
What is the primary difference between FDI and portfolio investment?
A) FDI involves a purchase of stocks, while portfolio investment involves establishing a business in a foreign country
B) FDI involves long-term investments in businesses, while portfolio investment involves short-term financial investments in foreign stocks or bonds
C) FDI involves capital inflows, while portfolio investment involves capital outflows
D) FDI is only limited to developing countries, while portfolio investment applies to developed countries
Which type of FDI involves the establishment of a new business in the host country?
A) Horizontal FDI
B) Greenfield FDI
C) Vertical FDI
D) Portfolio FDI
What is the role of FDI in globalization?
A) It reduces the interdependence between nations
B) It promotes economic isolationism
C) It helps to integrate economies and encourages the flow of capital, goods, and services
D) It has no role in globalization
Which of the following is true about the economic impact of FDI?
A) It can reduce a country’s income and wealth distribution
B) It can help improve the country’s infrastructure, workforce skills, and technology
C) It leads to the collapse of the local economy
D) It creates significant disadvantages for foreign businesses
What is “horizontal FDI”?
A) Investment in a company that is in a different industry than the investor’s company
B) Investment in a company that operates in the same industry as the investor’s company
C) Investment in the stock market of a foreign country
D) Investment in a country’s infrastructure projects
Which factor contributes to a country being an attractive destination for FDI?
A) High taxes on foreign investment
B) Political instability and corruption
C) Availability of skilled labor and access to markets
D) Restrictive trade barriers
How does FDI impact the local firms in the host country?
A) It may reduce competition from foreign firms
B) It may drive local firms out of business due to increased competition
C) It has no effect on local firms
D) It leads to the growth of monopolies
Which of the following is an example of vertical FDI?
A) A car manufacturer from the United States builds a plant in Germany to produce car parts
B) A fast-food chain opens new restaurants in foreign countries
C) A technology company buys a software firm in a foreign market
D) A country invests in foreign bonds
What is one of the challenges for a host country receiving FDI?
A) It can lead to capital outflows if foreign companies repatriate profits
B) It always results in job creation
C) It leads to fewer foreign exchange reserves
D) It provides 100% control of the local market to the foreign investor
What is the main objective of outward FDI?
A) To gain access to resources and markets in foreign countries
B) To attract foreign investors to the home country
C) To finance local businesses
D) To limit exports to foreign markets
