Question 1

Which of the following products has a low value-to-weight ratio?

Accepted Answer

A)  Electronic components
B)  Personal computers
C)  Medical equipment
D)  Computer software
E)  CementF) A) and D)
G) A) and C)

Question 2

A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan. This is an example of:

Accepted Answer

A)  insourcing.
B)  stock consolidation.
C)  foreign direct investment.
D)  product differentiation.
E)  market segmentation.F) C) and D)
G) A) and B)

Question 3

Countries such as the United States, the United Kingdom, France, Germany, the Netherlands, and Japan dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest multinationals because they:

Accepted Answer

A)  were the most developed countries postwar and home to the largest and best capitalized enterprises.
B)  pursued a policy of blocking or restricting FDI inflow into their own economies.
C)  provided subsidies for their domestic firms to protect them from foreign competition.
D)  control much of the operating structure of the WTO which governs international trade.
E)  were the governing body of the International Monetary Fund.F) A) and B)
G) All of the above

Question 4

Economists refer to knowledge "spillovers" as externalities, and there is a well-established theory suggesting that firms can benefit from such externalities by locating close to their source.

Accepted Answer

A) True 
 B)False

Question 5

By limiting imports through quotas, governments reduce the attractiveness of FDI and licensing.

Accepted Answer

A) True 
 B)False

Question 6

Which account in the balance of payments records transactions involving the export and import of goods and services?

Accepted Answer

A)  Current
B)  Foreign
C)  Internal
D)  Tariff
E)  SavingsF) A) and B)
G) A) and E)

Question 7

The pragmatic nationalist view is that:

Accepted Answer

A)  FDI benefits only the host country.
B)  FDI does not make any positive contribution to the host economy.
C)  every country should adopt the free market view.
D)  FDI should not be allowed by any country as it is an instrument of economic domination rather than economic development.
E)  FDI has both benefits and costs.F) A) and E)
G) A) and B)

Question 8

Many investor nations now have government-backed insurance programs to cover major types of foreign investment risk like the risks of expropriation (nationalization), war losses, and the inability to transfer profits back home.

Accepted Answer

A) True 
 B)False

Question 9

What is meant by the term foreign direct investment? Describe the difference between the flow of foreign direct investment and the stock of foreign direct investment.

Accepted Answer

Foreign direct investment (FDI) occurs w...

Question 10

By the early 1990s, the radical position toward FDI was in retreat due to the rise of communism in eastern Europe.

Accepted Answer

A) True 
 B)False

Question 11

In the context of FDI, describe the political ideologies of the radical view, the free market view, and pragmatic nationalism.

Accepted Answer

The radical view of FDI traces its roots...

Question 12

Which of the following refers to the amount of FDI undertaken over a given period (normally a year) ?

Accepted Answer

A)  Portfolio
B)  Flow
C)  Status
D)  Stock
E)  FragmentF) None of the above
G) A) and E)

Question 13

Indirect effects of FDI on employment in a host country arise when:

Accepted Answer

A)  a foreign MNE employs a number of host-country citizens.
B)  jobs are created because of increased local spending by employees of an MNE.
C)  an MNE brings in managers from the home country for its operations in the host country.
D)  an MNE recruits people from the host country for research and development.
E)  an MNE sends home country employees to host countries for training.F) A) and B)
G) A) and C)

Question 14

Which view argues that international production should be distributed among countries according to the theory of comparative advantage?

Accepted Answer

A)  Conservative
B)  Pragmatic nationalism
C)  Free market
D)  Radical
E)  Keynesian economicF) A) and B)
G) A) and C)

Question 15

Which of the following statements is most likely to be true regarding the effects of FDI on employment?

Accepted Answer

A)  FDI does not result in job creation.
B)  FDI has only indirect effects on employment in the host country.
C)  The indirect employment effects of FDI are always smaller than the direct effects.
D)  When FDI takes the form of an acquisition of an established enterprise in the host economy as opposed to a greenfield investment, the immediate effect is always an increase in the employment.
E)  A beneficial employment effect claimed for FDI is that it brings jobs to a host country that would otherwise not be created there.F) A) and E)
G) None of the above

Question 16

What are the benefits of FDI to the home (source) country?

Accepted Answer

The benefits of FDI to the home (source)...

Question 17

Since World War II, the United States has been the largest source country for FDI.

Accepted Answer

A) True 
 B)False

Question 18

When a firm exports, it need not bear the costs associated with FDI, and it can reduce the risks associated with selling abroad by using a native sales agent. Exporting, however, is not without its limitations. Discuss the most common limitations of exporting as compared to FDI.

Accepted Answer

The viability of an exporting strategy i...

Question 19

Which of the following statements regarding the free market view is true?

Accepted Answer

A)  According to the free market view, MNEs decrease the overall efficiency of the world economy.
B)  The free market view argues that FDI is a benefit to both the source country and the host country.
C)  According to the free market view, MNEs can never be instruments of economic development, only of economic domination.
D)  According to the free market view, FDI is beneficial to the host country of an MNE but it is harmful for the home country of the MNE.
E)  The free market view traces its roots to Marxist political and economic theory.F) None of the above
G) A) and E)

Question 20

The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.

Accepted Answer

A) True 
 B)False

Exam 8: Foreign Direct Investment

The pragmatic nationalist view is that:

Correct AnswerverifiedShow Answer

Which account in the balance of payments records transactions involving the export and import of goods and services?

Correct AnswerverifiedShow Answer

Since World War II, the United States has been the largest source country for FDI.

Correct AnswerverifiedShow Answer

Indirect effects of FDI on employment in a host country arise when:

Correct AnswerverifiedShow Answer

What are the benefits of FDI to the home (source) country?

Correct AnswerverifiedThe benefits of FDI to the home (source)...View AnswerShow Answer

Countries such as the United States, the United Kingdom, France, Germany, the Netherlands, and Japan dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest multinationals because they:

Correct AnswerverifiedShow Answer

What is meant by the term foreign direct investment? Describe the difference between the flow of foreign direct investment and the stock of foreign direct investment.

Correct AnswerverifiedForeign direct investment (FDI) occurs w...View AnswerShow Answer

Which view argues that international production should be distributed among countries according to the theory of comparative advantage?

Correct AnswerverifiedShow Answer

Economists refer to knowledge "spillovers" as externalities, and there is a well-established theory suggesting that firms can benefit from such externalities by locating close to their source.

Correct AnswerverifiedShow Answer

By limiting imports through quotas, governments reduce the attractiveness of FDI and licensing.

Correct AnswerverifiedShow Answer

Many investor nations now have government-backed insurance programs to cover major types of foreign investment risk like the risks of expropriation (nationalization), war losses, and the inability to transfer profits back home.

Correct AnswerverifiedShow Answer

By the early 1990s, the radical position toward FDI was in retreat due to the rise of communism in eastern Europe.

Correct AnswerverifiedShow Answer

Which of the following statements regarding the free market view is true?

Correct AnswerverifiedShow Answer

In the context of FDI, describe the political ideologies of the radical view, the free market view, and pragmatic nationalism.

Correct AnswerverifiedThe radical view of FDI traces its roots...View AnswerShow Answer

A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan. This is an example of:

Correct AnswerverifiedShow Answer

The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.

Correct AnswerverifiedShow Answer

When a firm exports, it need not bear the costs associated with FDI, and it can reduce the risks associated with selling abroad by using a native sales agent. Exporting, however, is not without its limitations. Discuss the most common limitations of exporting as compared to FDI.

Correct AnswerverifiedThe viability of an exporting strategy i...View AnswerShow Answer

Which of the following refers to the amount of FDI undertaken over a given period (normally a year) ?

Correct AnswerverifiedShow Answer

Which of the following statements is most likely to be true regarding the effects of FDI on employment?

Correct AnswerverifiedShow Answer

Which of the following products has a low value-to-weight ratio?

Correct AnswerverifiedShow Answer

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The benefits of FDI to the home (source)...
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Foreign direct investment (FDI) occurs w...
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The radical view of FDI traces its roots...
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The viability of an exporting strategy i...
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