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69) Recent years have seen a ________ in the number of countries that adhere to a radical ideology
regarding FDI.
A) marked decline
B) slight decline
C) marked increase
D) slight increase
70) The free market view argues that international production should be distributed among
countries according to the
A) eclectic paradigm.
B) theory of competitive advantage.
C) new trade theory.
D) theory of comparative advantage.
71) According to pragmatic nationalist view, FDI should be allowed so long as
A) the benefits outweigh the costs.
B) they do not aggressively court domestic firms.
C) the costs outweigh the benefits.
D) the MNE does not seek tax breaks or grants.
72) Why is it said that not all the new jobs created by FDI represent net additions in employment?
A) because of the uncertainty of the overall economic environment
B) because most of the job creation is indirect in nature
C) because jobs created by an investment may be offset by the jobs lost in domestic companies
D) because the unemployment rate more or less remains constant over the short term
73) When a company brings capital and/or technology to a host country, the host country benefits
from the
A) political effect of FDI.
B) resource-transfer effect of FDI.
C) balance-of-payments effect of FDI.
D) bandwagon effect of FDI.
74) A country's ________ keep track of its payments to and its receipts from other countries.
A) federal payments ledgers
B) concurrent accounts
C) checks-and-balances accounts
D) balance-of-payments accounts
75) Host country citizens that are employed by an MNE following an FDI are an example of
A) an internality.
B) a direct effect.
C) an externality.
D) an indirect effect.
76) A country's ________ accounts keep track of both its payments to and its receipts from other
countries.
A) current
B) offshore
C) balance-of-payments
D) currency
77) If the FDI is a substitute for imports of goods or services, the effect can be to improve the
________ of the host country's balance of payments.
A) offshore account
B) currency account
C) market imperfections
D) current account
78) FDI can benefit the home country's ________ if the foreign subsidiary creates demands for
home-country exports of capital equipment, intermediate goods, complementary products, and the
like.
A) balance of payments
B) oligopolistic industry
C) current accounts
D) licensing endeavors
79) Which of the following arises when a country is importing more goods and services than it is
exporting?
A) current account surplus
B) trade deficit
C) trade surplus
D) trade balance
80) In which of the following situations would FDI improve the current account of the host
country's balance of payments?
A) if the foreign subsidiary imports a substantial number of its inputs from abroad
B) if the FDI reduces existing employment opportunities
C) if the FDI is a substitute for imports of goods or services
D) if the FDI results in substitution of products produced domestically
81) In which way can the source country's balance of payments benefit from FDI made in a foreign
country?
A) from cash outflow during the initial investment to finance the FDI
B) if the purpose of the foreign investment is to serve the home market from a low-cost production
location
C) from the inward flow of foreign earnings
D) if FDI is a substitute for direct exports
82) How is the adverse effect of the balance of payments for the home country due to FDI usually
offset?
A) by increased imports to the home country as a result of the FDI
B) by the subsequent inflow of foreign earnings
C) by substituting direct exports made earlier from the home country
D) by further investments usually made to expand foreign operations
83) FDI undertaken to serve the home market is known as
A) outsourcing.
B) FDI substitution.
C) offshore production.
D) home market FDI.
84) How can FDI undertaken to serve the home market stimulate economic growth in the home
country?
A) by freeing home-country resources to concentrate on activities where the home country has a
comparative advantage
B) by importing more goods and services than it is exporting
C) by circumventing trade barriers that may have prevented direct exports in the past
D) by reducing demand for home-country exports of capital equipment, intermediate goods, and
complementary products
85) What is double taxation in the context of FDI?
A) taxation at twice the normal rate for foreign companies
B) taxing the producers as well as suppliers
C) taxation of income in both home and host country
D) taxation of both income as well as dividends paid
86) Through their choice of policies, home countries can both encourage and restrict FDI by local
firms. Policies designed to encourage outward FDI include which of the following?
A) tax rebates
B) political pressure
C) expropriation
D) domestic risk insurance
87) The two most common methods of restricting inward FDI are ownership restraints and
A) resource endowments.
B) performance requirements.
C) national sovereignty.
D) incentives.
88) Which of the following is a home-country policy aimed at restricting outward FDI flow?
A) taxing domestic companies' foreign earnings at a higher rate than their domestic earnings
B) implementation of government-backed insurance programs to cover major types of foreign
investment risk
C) eliminating double taxation of foreign income
D) persuading host countries to relax their restrictions on inbound FDI
