IB chapter 6 (FDI)

Foreign Direct Investment (FDI) refers to the investment made by _______ from one country into another country.

Which of the following is NOT a reason why countries seek to attract FDI?

• To acquire new technology and skills

• To increase employment opportunities

• To reduce competition in the domestic market

• To increase export opportunities

Which of the following is an advantage of FDI for the host country?

• Increased competition in the domestic market

• Decreased employment opportunities

• Increased foreign control over the domestic economy

• Increased capital inflows and investment opportunities

Why do countries seek FDI?

Answer explanation

Countries seek FDI to stimulate economic growth, create employment opportunities, and attract new technologies and expertise.

Which of the following is a disadvantage of FDI for the host country?

A. B. C. D.

• Increased competition in the domestic market

• Increased employment opportunities

• Increased domestic control over the foreign economy

• Decreased capital inflows and investment opportunities

Which of the following is NOT a mode of FDI?

• Joint venture

• Licensing

• Franchising

• Exporting

Which of the following is an example of horizontal FDI?

• A US automaker investing in a Japanese automaker

• A US automaker investing in a US auto parts supplier

• A US automaker investing in a Chinese tire manufacturer

• A US automaker investing in a US software company

Do you think Foreign Direct Investment (FDI) is important for a country's economic growth?

(in your own opinion, no right or wrong answer)

• Yes, FDI can bring in new technology, jobs, and capital to a country.

• No, FDI takes away jobs and resources from the host country.

• I'm not sure.

FDI is a form of portfolio investment.

• TRUE

• FALSE

Answer explanation

False.

FDI is not a form of portfolio investment but rather involves the acquisition of controlling ownership in a foreign company.

The benefits of FDI include the transfer of technology and knowledge, increased competition, job creation, and _______.