International Economics - ICF

How is foreign investment different from domestic investment?

• The investors are foreigners.

• There are complicated factors including legal systems, customs, transportation, etc. across borders

• Exchange rate is involved.

• Open market creates a less intensively competitive environment.

What is incorrect about FPI?

• It is mainly in the form of stocks or bonds.

• It is involved in management.

• It is denominated in a national currency.

• It takes place primarily through financial institutions such as banks and investment funds.

This is a type of FDI that the parent company builds its operations from the ground up in other countries.

In addition to the construction of new production facilities, these projects can also include the building of new distribution hubs, offices, and living quarters. What is it?

(a)  

Which of the following is NOT a beneficial effect of direct investment on the Home country?

• Transfer of technology

• Higher profits

• Risk diversification

• Avoids the possible loss of export markets

Two main characteristics of investments are:

• risk and profitability

• resource transfer and balance of payment effects

• job creation and technology transfer

• higher rate of returns and technology transfer

A company buys a foreign firm referring to a(n)...

(a)  

__________ occurs, according to the U.S. Department of Commerce, whenever a U.S. citizen, organization, or affiliated group takes an interest of 10% or more in a foreign business entity.

• Foreign portfolio investment

• Oversea remittance

• Foreign direct investment

• Official development assistance

Foreign investors prefer direct investments to portfolio investments because they want to...

• diversify risk and gain higher rate of return on capital

• export product to the host market

• retain direct control over their unique production knowledge or managerial skills

• transfer knowledge and technology to local investors

These are the goals of Horizontal FDI, except...

• To avoid tariff barriers

• To reduce production costs

• To gain market shares and prolong product life cycle

• To specialize production on an international scale

Prior to World War 1, the largest home country of foreign investments was...

• China

• the United States of America

• the United Kingdom

• Japan