Global Enviro Exam 1 CH 8

What two positive contributions to a host country can FDI provide? Protect intellectual property Boost a country's economic growth rate Decrease any trade imbalance Supply capital, technology, and management resources

Boost a country's economic growth rate Supply capital, technology, and management resources

When the German-based company Forrest Health Supply Inc. developed operations in Italy, it built a manufacturing facility there. In turn, the new facility also imported supplies and equipment from companies based in Germany. Which home country benefit of FDI does this represent?

Employment effects

When a firm invests directly in a business or venture in another country, it is called ______.

FDI

Which view of FDI is based on the classical international trade theory of Smith and Ricardo asserting that international production should be based on comparative advantage?

Free market

The board of directors of Green Garden Supply in Vermont voted to invest in a production facility in Mexico as a way to lower costs and free up financial resources for the company to grow in other areas. What form of FDI is this company using? Multiple choice question.

Offshore production

With the formation of the ______ in 1995, there now is a multinational institution that has become involved in regulations governing FDI.

WTO

The stock of foreign direct investment refers to the total Multiple choice question.

accumulated value of foreign-owned assets at a given point in time.

A country's ___________ accounts track expenditures and receipts from other countries.

balance-of-payments

The _____ account tracks goods and services exports and imports in balance-of-payments accounting. Multiple choice question.

current

The 2,000 employees working in Toyota's factory in France are an example of the ______ effect of FDI on employment, while the 2,000 new jobs that were created in support industries are an example of the ______ effect of FDI on employment.

direct, indirect

To encourage FDI, many countries have eliminated ______ taxation of foreign income.

double

Foreign direct investment can be in the form of a(n) ______, which occurs when a firm establishes a new operation in a foreign market. Multiple choice question.

greenfield investment

Venezuela and Bolivia are examples of countries that have become more ___ to FDI. (Choose open or hostile.)

hostile

FDI occurs when a company invests in facilities Multiple choice question.

in a foreign country

Allowing a foreign firm to produce and sell your product for a royalty fee is called _____

licensing

The ability of an individual, company, or economy to conduct an activity better than another for reasons related to location is called a(n) Multiple choice question.

location-specific advantage.

John Dunning proposed that ______ are an important factor when explaining the nature of foreign direct investment.

location-specific advantages

One cost to a host country related to FDI would be the __ (gain or loss?) of sovereignty and autonomy.

loss

Exporting strategy does not work for a ___ (low or high?) value-to-weight ratio product that can be produced anywhere.

low

Exporting strategy does not work for a ___ value-to-weight ratio product that can be produced anywhere.

low

Greenfield investing spurs competition by increasing the number of players in a market and this will tend to _____ prices and ______ economic welfare.

lower, increase

FDI that serves the home market is called ______ production.

offshore

A(n) ______ is a market form in which a market or industry has a limited number of large firms. Multiple choice question.

oligopoly

A key cost of FDI for the home country is when the balance of payments is adversely affected by the initial capital ____ required to finance the FDI. (Choose inflow or outflow.)

outflow

The _____ view of foreign direct investment has its basis in Marxist theory.

radical

Research shows that multinational companies ____ technology when they invest in a foreign country. (Choose transfer or deplete.)

transfer

Tax concessions can be used by a government to encourage foreign firms to do business in that country. True false question.

true

______ refers to shipping goods and services out of the jurisdiction of a country.

Exporting

What are two alternatives companies can use instead of FDI to take advantage of opportunities in foreign markets? Multiple select question. Embargoes Exporting Licensing Importing

Exporting Licensing

A low-cost, no-frills grocery store chain that began in the United States decided to open similar stores in Germany which did not have any stores like this. What type of FDI is this company using?

Greenfield investment

How has a shift toward democratic political institutions and free market economies affected FDI? Multiple choice question.

These shifts encourage businesses to participate in FDI.

What are two current trends in FDI? Multiple select question. A decrease in the volume of FDI worldwide An increase in the volume of FDI An increase in FDI aimed at countries that have liberalized their FDI regimes A decrease in the volume of FDI directed at countries that have recently liberalized their FDI regimes

An increase in the volume of FDI An increase in FDI aimed at countries that have liberalized their FDI regimes

What are two benefits of FDI to a home country? Multiple select question. Foreign subsidiary creates demand for home-country exports Outward flow of domestic profits Resource transfer effect where skills go to foreign subsidiary MNE learns skills from exposure to foreign market

Foreign subsidiary creates demand for home-country exports MNE learns skills from exposure to foreign market

What are two benefits of FDI to a home country? Multiple select question. Outward flow of domestic profits Resource transfer effect where skills go to foreign subsidiary Foreign subsidiary creates demand for home-country exports MNE learns skills from exposure to foreign market

Foreign subsidiary creates demand for home-country exports MNE learns skills from exposure to foreign market

In the last decade, FDI inflows directed at developing nations have increased and even surpassed inflows into developed nations for the first time in 2018. Which of these developing economies was the recipient of these FDI inflows? Multiple choice question.

Former Soviet Union

Which view of FDI states that there are benefits and costs to FDI and that countries attempt to maximize the benefits and minimize the national costs of FDI? Multiple choice question.

Pragmatic nationalism

Which country has consistently been the largest source of FDI since World War II? Multiple choice question.

The United States

Which two factors would reveal that a company has little bargaining power when considering FDI? Multiple select question. Company is competing with multiple other firms Host government knows there are few alternatives to what the company is offering The company has a short period of time to complete negotiations Host government does not value what the firm has to offer

The company has a short period of time to complete negotiations Host government does not value what the firm has to offer

Which theory of foreign direct investment attempts to combine (1) the theories that focus on favoring direct investment when exporting and licensing are available and (2) theories that say certain locations are favored over others for FDI? Multiple choice question.

The eclectic paradigm

The United States, the United Kingdom, the Netherlands, France, Germany, and Japan together have accounted for the majority of all FDI outflows for 1998-2018 for what two reasons? Multiple select question. They had the shortest history as trading nations. They were most economically deprived postwar and required greater FDI inflows. They were the most developed nations with the largest economies in the postwar period. They provided the base for many of the largest and best-capitalized businesses.

They were the most developed nations with the largest economies in the postwar period. They provided the base for many of the largest and best-capitalized businesses.

In the past, most foreign direct investment has been directed at _____ nations. Multiple choice question.

developed

The ____ of FDI is the amount of FDI attempted over a period of time (usually one year).

flow

The ______ view of FDI states that international production should be allocated based on the theory of comparative advantage.

free market

FDI occurs when a company invests in facilities Multiple choice question. in a competitor's region. that are adjacent to the home-country office. in a foreign country. that have spillover knowledge.

in a foreign country

The radical view toward FDI argues that MNE's extract ______ from the host country and take them back to their home country. Multiple choice question.

profits