Exam 7: Foreign Direct Investment

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. -Transactions involving the export of Happyland's textile and computer products are included in its ________ account.

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)________.

Exports and imports of tourism and business consulting are included in the ________ account of a country's balance of payments.

Ownership restrictions is a method used by host countries to restrict incoming 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.

Increasing globalization is causing a growing number of international companies from emerging markets to undertake FDI.

In foreign direct investment,complete ownership of a company guarantees its complete control.

Which of the following theories states that firms undertake foreign direct investment,when the features of a particular location combine with ownership and internalization advantages,to make the location appealing for investment?

When a U.S.subsidiary in another country remits profits back to its parent company in the U.S.,the receipt of profits is recorded in the ________.

A(n)________ advantage is the advantage of conducting a particular economic activity in a specific area because of the characteristics of that area.

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. -Which of the following systems of production is used by GMI?

The ________ theory states that when an aspect of the market makes a transaction less efficient than it could be,a company will undertake foreign direct investment to internalize the transaction and thereby remove the efficiency-reducing aspect.

Ownership restrictions and performance demands are used by ________.

Home nations discourage foreign direct investment outflows because it ________.

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

Which of the following countries would a watchmaker most prefer to manufacture its watches in,in order to capitalize on buyer perceptions of high quality?

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

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. -Which of the following methods will Happyland use to encourage foreign direct investment inflows?

The income payments account includes income earned on home country assets held abroad.

A current account deficit occurs when a country exports more goods and receives more income from abroad than it imports and pays abroad.