Flashcards
Foreign Direct Investment
Cards in this deck (12)
- 1What is FDI?Investing in another country by either setting up operations or buying assets in firms in another country.
- 2What is horizontal FDI?Producing the same products or services as done at home.
- 3What is vertical FDI?Where one firm is seeking to acquire materials or support for its own products or services.
- 4What are some examples (briefly) of FDI?- Increase in income.
- Increase in tax revenue.
- Increase in employment.
- Reduce national debt.
- Balance of payments.
- Technology and skills transfer. - 5Why is an increase in income a benefit of FDI?Flows of FDI should increase levels of GDP for the host nation, extra output and employment should increase economic growth and raise living standards.
- 6Why is an increase in tax revenue a benefit of FDI?The profits made by MNCs are taxed by the host nation, which increases tax revenue.
- 7Why is an increase in employment a benefit?FDI can help create jobs in the host nation, reducing unemployment rate and saving money that would otherwise be paid out in benefits to the unemployment.
- 8Why is reducing national debt an advantage?It can have a positive impact on a country's finances, it shows the rest of the word that the nation is more financially stable, interest payments might be reduced - country might find it easier to borrow in the future.
- 9How is balance of payments a benefit?More money should flow into the host nation's account, if any of the output is sold abroad, there will be more money into the balance of payments.
- 10How is technology and skills transfer an advantage?MNC investment often entails new technologies and modern practices, which can transfer to local firms.
- 11What are some disadvantages of FDI?- Negatively effect balance of payment.
- Tax evasion.
- May put smaller firms out of businesses.
- Exploit workers. - 12What are some evaluation points?- Depends on how ethical the firm is: if it exploits workers and evades tax, not desirable.
- Depends on the nature of the firm
- Are they bringing high skilled jobs?
- Multiplier effect - a long term car plant can bring more skills, etc.
- Are they paying taxes?
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- AS - Level Business Studies (THEME 4) Flashcards on Foreign Direct Investment , created by Jessica Ridley on 19/03/2017.
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- Jessica Ridley
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