Which of the following statements is true? a. Multinational firms tend to reduce
ID: 1213135 • Letter: W
Question
Which of the following statements is true?
a. Multinational firms tend to reduce the flow of technology between countries.
b. Most of the foreign direct investment found in labor-intensive industries.
c. Multinationals do not always help to reduce the trade deficit of the host country.
d. Foreign firms contribute to a significant increase in the host country's unemployment rate.
e. Foreign direct investment reduces the stock of the domestic country.
In many less developed countries, per capita GDP falls even though real GDP rises, because:
a. output grows at a slower rate than the population.
b. the GDP measures in developing countries are always inaccurate.
c. consumption spending exceeds investment spending.
d. these countries face an acute trade deficit.
e. prices increase faster than an increase in actual output level.
A key reason for low foreign direct investment in developing nations is:
a. the presence of tariff and non tariff barriers on imports.
b. the fear of exploitation of domestic resources by foreign owners.
c. the lack of government-operated enterprises.
d. the high interest rate charged on loans.
e. the fear of falling inflation rates.
Explanation / Answer
Q1:
The correct statement is (b).
Developing economies are benefited by FDI due to their abundant cheap resources and low labor cost. They have comparative advantage in their labor intensive industries
Q2:
The correct option is (a).
When a country's GDP is high it implies that the country is increasing the amount of production that is taking place in the economy and the citizens have a higher income and hence are spending more. In other words, if a nation’s population growth is slow, then its standard of living increases. Thus, real GDP grows faster than population.
Q3:
The correct statement is (b).
Foreign direct investment (FDI) is a key element for developing countries to increase their economic growth. Under FDI, the MNE acquires shares of a local company and control of its assets and markets are transferred to the new parent.
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