Practice Question - Chapter 8 (International Capital Flows)

With respect to the national saving and investment identity for any country, the quantity of _______________ at any given time by savings must ________________ for purposes of making investments.

• foreign aid supplied; be lower than the quantity of domestic aid demanded

• foreign financial capital imports; equal to supply of domestic capital available

• foreign capital imports; less than the supply of domestic capital available

• financial capital supplied; equal the quantity of capital financial demanded

From an economic perspective, returns on foreign investment are included in the overall measure of trade because financial investments:

• are a form of trade that takes place in the financial capital market.

• can also be thought of as payments made by the government.

• are made by parties in the U.S. economy and foreign investors.

• have expanded substantially in the U.S. over the last few decades.

To a macroeconomist, a trade deficit is synonymous with which of the following?

• outflow of financial capital

• outflow of goods and services

• inflow of financial capital

• inflow of goods and services

With respect to the national saving and investment identity for any country, the quantity of _______________ at any given time by savings must ________________ for purposes of making investments.

• foreign aid supplied; be lower than the quantity of domestic aid demanded

• foreign financial capital imports; equal to supply of domestic capital available

• foreign capital imports; less than the supply of domestic capital available

• financial capital supplied; equal the quantity of capital financial demanded

Which of following are examples of foreign direct investments?

• Mergers

• Acquisitions or partnership in retail

• Vertical FDI

• Service & Manufacturing

More expansion of foreign direct investment can boost:

• Unemployment

• Supply

• Employment

• Money circulation

Which of the following are  benefits of Foreign direct investments?

• Job creation

• Non- improved new technology 

• Helping countries with limited resources 

• No difference in  government policies

What is Foreign direct investment?

• This is when a country makes an investment into a company.

• This is when a company makes an investment into a foreign country and has the right to control.

• When a domestic country invest into its own companies.

• When a foreign individual invest in domestic stock markets

One reason direct investment may be prefered to portfolio is

• it fills the savings investment gap.

• it doesn't pose a threat to national sovereignty

• it doesn't create an outflow on primary income.

• it is more long term and stable.

One possible disadvantage of FDI is

• transfer pricing and tax avoidance.

• interest payments rising.

• the DSR rising.

• increased foreign ownership.