Foreign Direct Investment Overview
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Questions and Answers

What does FDI stand for?

  • Foreign Development Income
  • Foreign Domestic Investment
  • Foreign Direct Investment (correct)
  • Foreign Domestic Income

    • What does positive net flow indicate in the context of FDI?

  • Foreign investors invest more in the country than domestic companies investing abroad
  • There is no investment happening either domestically or abroad
  • Investment is evenly balanced between domestic and foreign investors
  • Domestic companies invest more abroad than foreign investors in the country (correct)

    • What is the main characteristic of Horizontal FDI?

  • Conducting different activities in a foreign country
  • Focusing on import and export activities
  • Expanding foreign operations to new industries
  • Expanding domestic operations to a foreign country (correct)

    • What does Inward FDI measure?

    <p>Investments made by foreign companies in the domestic economy</p> Signup and view all the answers

    What is one of the key functions of FDI according to the text?

    <p>Facilitating technology transfer between countries</p> Signup and view all the answers

    Which statement accurately describes Outward FDI?

    <p>Measures investments made by domestic companies in a foreign economy</p> Signup and view all the answers

    What type of FDI is McDonald's opening restaurants in Japan?

    <p>Horizontal FDI</p> Signup and view all the answers

    If McDonald's were to purchase a large-scale farm in Canada to produce meat for their restaurants, what type of FDI would this be?

    <p>Vertical FDI</p> Signup and view all the answers

    Which of the following is NOT a motive for foreign direct investment?

    <p>Profit maximization</p> Signup and view all the answers

    What is a benefit of FDI for the host country?

    <p>Development of human capital</p> Signup and view all the answers

    What is a disadvantage of FDI for the host country?

    <p>Displacement of local businesses</p> Signup and view all the answers

    What is the main difference between foreign direct investment (FDI) and foreign portfolio investment (FPI)?

    <p>FDI offers the investor control over the business entity, while FPI does not</p> Signup and view all the answers

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