Exam 7: Foreign Direct Investment

Explain the concept of balance of payments and describe its two major components.

Building a subsidiary abroad from the ground up is called a greenfield investment.

Making investments in distribution in order to leapfrog channels of distribution that are tightly controlled by competitors is an example of ________.

The ________ theory states that a firm tries to establish a dominant presence in an industry by undertaking foreign direct investment.

According to the eclectic theory that explains FDI,an internalization advantage is the advantage of locating a particular economic activity in a specific location because of the characteristics of that location.

Which of the following is a major driver of foreign direct investment?

Which of the following is true of a "follow the leader" scenario in the context of foreign direct investment?

All factors of production are internationally mobile.

Firms from emerging markets account for a greater share of global mergers and acquisitions than developed markets.

Scenario: Global Manufacturing Inc. (GMI) Global Manufacturing Inc., a fast-growing U.S. company, plans for a production system in which two components of its product will be manufactured in locations where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI plans to purchase an existing company in Brazil to produce component A and build a subsidiary in Thailand to produce component B. -GMI's purchase of the Brazilian company is best classified as a(n)________.

Which of the following is an example of a greenfield investment?

Home nations discourage foreign direct investment outflows because it ________.

According to the market imperfections theory,competition is a common market imperfection.

Firms engage in FDI when the firms they supply have already invested abroad.This practice of "following clients" is observed in industries having ________.

A(n)________ advantage is the one that a company gains from incorporating a business activity within itself rather than leaving it to a relatively inefficient market.

________ represents passive holdings of securities such as foreign stocks,bonds,or other financial assets.

Trade barriers and specialized knowledge are examples of market imperfections.

Scenario: Happyland Happyland is a country characterized by beautiful beaches, vast natural resources, and a highly skilled labor force. Happyland is now encouraging foreign direct investment flows. The country has been exporting textiles, computer hardware, and software programs. The net result of the trade is that Happyland exports far more goods and services and receives more income from abroad than it imports and pays abroad. -If Happyland advertises its beaches and attracts tourists,the tourism-related income would be recorded in its ________ account.

Exports and imports of computer software,electronic components,and apparel are included in the ________ account of a country's balance of payments.

A company can achieve market power through ________.