Question 1

Which of the following groups are positively affected by foreign direct investment outflows?

Accepted Answer

A) The home country's labor unions 
B) Tax payers in the home country 
C) The home country's government 
D) The owners of the multinationals 
A) The home country's labor unions 
B) Tax payers in the home country 
C) The home country's government 
D) The owners of the multinationals

Question 2

Foreign Direct Investment (FDI) refers to:

Accepted Answer

A) the flow of funding provided by an investor or lender to establish or acquire a foreign company or to expand or finance an existing foreign company that the investor owns and controls. 
B) the hot money that an investor needs to get registered in a foreign stock exchange to make investments, and have the liberty to sell and take back the stocks purchased earlier. 
C) a method of funding business adopted by a foreign investor by participating directly in the secondary markets of a country, through investments in the country's stocks or bonds. 
D) the passive holding of securities such as foreign stocks, bonds, or other financial assets, none of which entails active management or control of the securities issued by the investor. 
A) the flow of funding provided by an investor or lender to establish or acquire a foreign company or to expand or finance an existing foreign company that the investor owns and controls. 
B) the hot money that an investor needs to get registered in a foreign stock exchange to make investments, and have the liberty to sell and take back the stocks purchased earlier. 
C) a method of funding business adopted by a foreign investor by participating directly in the secondary markets of a country, through investments in the country's stocks or bonds. 
D) the passive holding of securities such as foreign stocks, bonds, or other financial assets, none of which entails active management or control of the securities issued by the investor.

Question 3

The figure given below represents the effects in the labor markets due to migration. Here the world has been divided into a high-income "North" (left panel) and a low-income "South" (right panel). Dn and Sn are the labor demand and the labor supply curves in North. Ds and (Sr + Smig) are the labor demand and pre-migration labor supply curves in South. Sr is the post-migration labor supply curve in South. The value c is the cost of migrating.   After migration of the workers, the workers in North earn _____ per hour and South workers earn _____ per hour.

Accepted Answer

A) $6.75; $4.25 
B) $8.00; $4.25 
C) $6.75; $3.00 
D) $8.00; $3.00 
A) $6.75; $4.25 
B) $8.00; $4.25 
C) $6.75; $3.00 
D) $8.00; $3.00

Question 4

The figure given below represents the effects in the labor markets due to migration. Here the world has been divided into a high-income "North" (left panel) and a low-income "South" (right panel). Dn and Sn are the labor demand and the labor supply curves in North. Ds and (Sr + Smig) are the labor demand and pre-migration labor supply curves in South. Sr is the post-migration labor supply curve in South. The value c is the cost of migrating.   When migration between North and South is allowed, how many workers will choose to migrate to North?

Accepted Answer

A) 20 million 
B) 30 million 
C) 40 million 
D) 50 million 
A) 20 million 
B) 30 million 
C) 40 million 
D) 50 million

Question 5

Foreign Direct Investment is used for all foreign securities investments that do not involve management control.

Accepted Answer

A) True 
 B)False

Question 6

It is easier to transfer capital from one country to another using FDI than to use international portfolio investment.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following provides a good explanation of why multinational firms exist?

Accepted Answer

A) Location factors that favor exporting over foreign production 
B) The need to shift financial capital between countries 
C) Internalization advantages that favor direct investment over contracting with independent foreign firms 
D) Firms lack inherent knowledge of foreign laws, procedures, and practices. 
A) Location factors that favor exporting over foreign production 
B) The need to shift financial capital between countries 
C) Internalization advantages that favor direct investment over contracting with independent foreign firms 
D) Firms lack inherent knowledge of foreign laws, procedures, and practices.

Question 8

Which of the following refers to transfer pricing by an MNE?

Accepted Answer

A) The act of buying a good at a low price and selling it at a high price 
B) The process of setting a high price for a good in a market with relatively inelastic demand and setting a low price in a market with relatively elastic demand 
C) Lowering the product prices to undercut the competitors and gain a greater market share 
D) Setting prices by the company for things that move between the units of the company 
A) The act of buying a good at a low price and selling it at a high price 
B) The process of setting a high price for a good in a market with relatively inelastic demand and setting a low price in a market with relatively elastic demand 
C) Lowering the product prices to undercut the competitors and gain a greater market share 
D) Setting prices by the company for things that move between the units of the company

Question 9

The figure given below represents the effects in the labor markets due to migration. Here the world has been divided into a high-income "North" (left panel) and a low-income "South" (right panel). Dn and Sn are the labor demand and the labor supply curves in North. Ds and (Sr + Smig) are the labor demand and pre-migration labor supply curves in South. Sr is the post-migration labor supply curve in South. The value c is the cost of migrating.   The net gain to the migrants is represented by the area:

Accepted Answer

A) (a + b). 
B) (e + f). 
C) (d + e). 
D) (a + f). 
A) (a + b). 
B) (e + f). 
C) (d + e). 
D) (a + f).

Question 10

Trade among parent and affiliates engaged in different stages of production shows that foreign direct investment and trade can sometimes be complements.

Accepted Answer

A) True 
 B)False

Question 11

What factors should be considered in determining whether a firm should sell to buyers in a foreign country by exporting from its home country or by setting up local production in the foreign country to produce the products that are sold to foreign consumers? When identifying these factors, clearly explain how and why they push the decision toward one or the other of the two available choices.

Accepted Answer

The advantages and disadvantages of prod

Question 12

Concern about the ability of independent foreign firms to maintain product quality:

Accepted Answer

A) often results in the formation of a license agreement between a foreign firm and an MNE. 
B) makes licensing firms in the foreign markets preferable to FDI. 
C) is an inherent disadvantage faced by the multinationals. 
D) makes FDI preferable to licensing firms in the foreign markets. 
A) often results in the formation of a license agreement between a foreign firm and an MNE. 
B) makes licensing firms in the foreign markets preferable to FDI. 
C) is an inherent disadvantage faced by the multinationals. 
D) makes FDI preferable to licensing firms in the foreign markets.

Question 13

Which of the following is an inherent disadvantage to being a multinational enterprise?

Accepted Answer

A) An MNE does not initially have the native understanding of local laws, customs, procedures, practices, and relationships. 
B) An MNE does not have the same assets as those held by its local competitors in the host market. 
C) An MNE does not enjoy comparative advantages in the same goods as those of its local competitors in the host market. 
D) An MNE's profits are doubly taxed by two governments. 
A) An MNE does not initially have the native understanding of local laws, customs, procedures, practices, and relationships. 
B) An MNE does not have the same assets as those held by its local competitors in the host market. 
C) An MNE does not enjoy comparative advantages in the same goods as those of its local competitors in the host market. 
D) An MNE's profits are doubly taxed by two governments.

Question 14

Multinational enterprises use transfer pricing to:

Accepted Answer

A) lower prices of their products and gain market share. 
B) reduce their global tax burden. 
C) move products to the markets where the demand for those goods is relatively inelastic. 
D) provide managers in a foreign affiliate with an incentive to maximize local profit. 
A) lower prices of their products and gain market share. 
B) reduce their global tax burden. 
C) move products to the markets where the demand for those goods is relatively inelastic. 
D) provide managers in a foreign affiliate with an incentive to maximize local profit.

Question 15

Which of the following groups are negatively affected by foreign direct investment flows?

Accepted Answer

A) The host country's workers 
B) The home country's workers 
C) The host country's government 
D) The suppliers of inputs to the affiliates of foreign multinationals 
A) The host country's workers 
B) The home country's workers 
C) The host country's government 
D) The suppliers of inputs to the affiliates of foreign multinationals

Question 16

The changes in China's FDI policy since 2006 are likely to shift manufacturing FDI away from unskilled-labor-intensive production like toys.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is most likely to be an impact of FDI?

Accepted Answer

A) There may arise temporary unemployment in the home country. 
B) The rental rate of capital declines in the home country. 
C) The wage rate declines in the host countries. 
D) Government revenue of the home country increases. 
A) There may arise temporary unemployment in the home country. 
B) The rental rate of capital declines in the home country. 
C) The wage rate declines in the host countries. 
D) Government revenue of the home country increases.

Question 18

_____ is the movement of people from one country to another country in which they plan to reside for some noticeable period of time.

Accepted Answer

A) Denationalization 
B) International transfer 
C) Internal migration 
D) International migration 
A) Denationalization 
B) International transfer 
C) Internal migration 
D) International migration

Question 19

China's economic growth and emergence as a major exporter was assisted by:

Accepted Answer

A) opening the country to FDI. 
B) restricting inflows of FDI. 
C) the use of inward-oriented policies. 
D) exploiting a comparative advantage in primary products. 
A) opening the country to FDI. 
B) restricting inflows of FDI. 
C) the use of inward-oriented policies. 
D) exploiting a comparative advantage in primary products.

Question 20

Sending countries that do not receive much in the way of remittances probably gain well-being, but those receive substantial remittances probably lose well-being.

Accepted Answer

A) True 
 B)False

Exam 15: Multinationals and Migration: International Factor Movements

Which of the following groups are positively affected by foreign direct investment outflows?

Foreign Direct Investment (FDI) refers to:

Foreign Direct Investment is used for all foreign securities investments that do not involve management control.

It is easier to transfer capital from one country to another using FDI than to use international portfolio investment.

Which of the following provides a good explanation of why multinational firms exist?

Which of the following refers to transfer pricing by an MNE?

Trade among parent and affiliates engaged in different stages of production shows that foreign direct investment and trade can sometimes be complements.

Concern about the ability of independent foreign firms to maintain product quality:

Which of the following is an inherent disadvantage to being a multinational enterprise?

Multinational enterprises use transfer pricing to:

Which of the following groups are negatively affected by foreign direct investment flows?

The changes in China's FDI policy since 2006 are likely to shift manufacturing FDI away from unskilled-labor-intensive production like toys.

Which of the following is most likely to be an impact of FDI?

_____ is the movement of people from one country to another country in which they plan to reside for some noticeable period of time.

China's economic growth and emergence as a major exporter was assisted by:

Sending countries that do not receive much in the way of remittances probably gain well-being, but those receive substantial remittances probably lose well-being.

International Economics Is Different

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade and the Environment

Trade Policies for Developing Countries

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

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