Topic 1. Foreign direct investment

When PepsiCo buys Wimm-Bill-Dann (Russian milk & juice producer), it is an example of

• horizontal FDI

• vertical FDI

• offshoring

• international outsourcing

What is the main motive for horizontal foreign direct investment?

• Access to local market

• Access to cheap funding

• Lower taxes abroad

• Access to local resources

What is the main motive for vertical foreign direct investment?

• Access to local market

• Access to cheap funding

• Lower taxes abroad

• Access to local resources

What is the sign of direct effects of foreign direct investment in the recipient economy?

• Positive

• Negative

• Generally positive but depend on characteristics of project

• Positive or negative, it is a subject for empirical analysis

What is the sign of indirect effects of foreign direct investment in the recipient economy?

• Positive

• Negative

• Generally positive but depend on characteristics of project

• Positive or negative, it is a subject for empirical analysis

What are the effects of foreign direct investment for the home economy in case of vertical FDI?

• Loss of jobs

• Loss of tax incomes

• Increase in competitiveness of investing company

• All answers are correct

German MNC has a plant in Russia ("ABC"). If the exchange rate RUR/EUR goes down, MNC will...

• loose

• gain

• loose if ABC uses local raw materials & exports its products

• gain if ABC uses local raw materials & exports its products