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Role of Foreign Direct Investment in Economic Development

Description: This quiz assesses your understanding of the role of Foreign Direct Investment (FDI) in economic development.
Number of Questions: 15
Created by:
Tags: fdi economic development investment multinational corporations
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What is the primary objective of Foreign Direct Investment (FDI)?

  1. To generate profits for multinational corporations

  2. To promote economic growth and development in host countries

  3. To transfer technology and expertise to developing countries

  4. To create employment opportunities in host countries


Correct Option: A
Explanation:

While FDI can have positive impacts on host countries, its primary objective is to generate profits for the investing companies.

Which of the following is NOT a potential benefit of FDI for host countries?

  1. Increased economic growth

  2. Job creation

  3. Improved infrastructure

  4. Increased dependence on foreign companies


Correct Option: D
Explanation:

While FDI can bring many benefits, increased dependence on foreign companies can be a potential downside.

What is the term used to describe the transfer of technology and expertise from multinational corporations to host countries?

  1. Technology transfer

  2. Knowledge transfer

  3. Skill transfer

  4. All of the above


Correct Option: D
Explanation:

Technology transfer, knowledge transfer, and skill transfer are all terms used to describe the process of transferring expertise from multinational corporations to host countries.

Which of the following is NOT a potential challenge associated with FDI?

  1. Environmental degradation

  2. Exploitation of workers

  3. Increased competition for local businesses

  4. Improved living standards in host countries


Correct Option: D
Explanation:

While FDI can have negative impacts, improved living standards in host countries is generally seen as a positive outcome.

What is the term used to describe the process of multinational corporations establishing production facilities in foreign countries?

  1. Offshoring

  2. Outsourcing

  3. Foreign direct investment

  4. None of the above


Correct Option: C
Explanation:

Foreign direct investment is the term used to describe the process of multinational corporations establishing production facilities in foreign countries.

Which of the following is NOT a potential strategy for host countries to attract FDI?

  1. Offering tax incentives

  2. Improving infrastructure

  3. Reducing bureaucratic hurdles

  4. Imposing strict environmental regulations


Correct Option: D
Explanation:

While host countries may implement various strategies to attract FDI, imposing strict environmental regulations is not typically seen as an effective approach.

What is the term used to describe the process of multinational corporations acquiring existing companies in foreign countries?

  1. Mergers and acquisitions

  2. Joint ventures

  3. Greenfield investment

  4. None of the above


Correct Option: A
Explanation:

Mergers and acquisitions is the term used to describe the process of multinational corporations acquiring existing companies in foreign countries.

Which of the following is NOT a potential impact of FDI on the balance of payments of host countries?

  1. Increased exports

  2. Increased imports

  3. Improved terms of trade

  4. Increased foreign exchange reserves


Correct Option: C
Explanation:

While FDI can have various impacts on the balance of payments, improved terms of trade is not typically a direct result of FDI.

What is the term used to describe the process of multinational corporations establishing new production facilities in foreign countries?

  1. Greenfield investment

  2. Brownfield investment

  3. Foreign direct investment

  4. None of the above


Correct Option: A
Explanation:

Greenfield investment is the term used to describe the process of multinational corporations establishing new production facilities in foreign countries.

Which of the following is NOT a potential impact of FDI on the labor market of host countries?

  1. Creation of new jobs

  2. Increased wages for skilled workers

  3. Improved working conditions

  4. Increased unemployment among low-skilled workers


Correct Option: C
Explanation:

While FDI can have various impacts on the labor market, improved working conditions is not typically a direct result of FDI.

What is the term used to describe the process of multinational corporations forming partnerships with local companies in foreign countries?

  1. Joint ventures

  2. Strategic alliances

  3. Foreign direct investment

  4. None of the above


Correct Option: A
Explanation:

Joint ventures is the term used to describe the process of multinational corporations forming partnerships with local companies in foreign countries.

Which of the following is NOT a potential impact of FDI on the environment of host countries?

  1. Pollution

  2. Deforestation

  3. Improved environmental standards

  4. Increased natural resource exploitation


Correct Option: C
Explanation:

While FDI can have various impacts on the environment, improved environmental standards is not typically a direct result of FDI.

What is the term used to describe the process of multinational corporations reinvesting their profits in host countries?

  1. Retained earnings

  2. Capital accumulation

  3. Foreign direct investment

  4. None of the above


Correct Option: A
Explanation:

Retained earnings is the term used to describe the process of multinational corporations reinvesting their profits in host countries.

Which of the following is NOT a potential impact of FDI on the economic growth of host countries?

  1. Increased investment

  2. Improved productivity

  3. Technology transfer

  4. Increased dependence on foreign companies


Correct Option: D
Explanation:

While FDI can have various impacts on economic growth, increased dependence on foreign companies is not typically seen as a positive outcome.

What is the term used to describe the process of multinational corporations repatriating their profits from host countries?

  1. Profit repatriation

  2. Capital flight

  3. Foreign direct investment

  4. None of the above


Correct Option: A
Explanation:

Profit repatriation is the term used to describe the process of multinational corporations repatriating their profits from host countries.

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