Exam 7: Foreign Direct Investment

If a Japanese citizen invests in the Australian stock market, the transaction would show up on the capital account of ________.

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

Scenario: Happyland Happyland, a country of about 48 million people with beautiful beaches, vast natural resources, and a highly skilled labor force, is encouraging foreign direct investment flows. The country has been exporting textiles, computer hardware, and software. The net result of 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 can Happyland use to encourage foreign direct investment inflows?

Which of the following statements is NOT true?

European Union nations, the United States, and Japan account for the vast majority of world foreign direct investment inflows.

Foreign direct investment is the purchase of physical assets or a significant amount of the ownership (stock) of a company in another country to gain a measure of management control.

Governments never intervene in the flow of foreign direct investment since it always generates jobs.

The practice of "following clients" can be expected in industries having ________.

Values, attitudes, and beliefs form the basis for much of a government's position regarding foreign direct investment.

A(n) ________ occurs when a country exports more goods and services and receives more income from abroad than it imports and pays abroad.

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

Scenario: Blickinstock at the Crossroads Auto parts supplier, Blickinstock Ltd., would like to expand its presence in Latin America. To that end, Blickinstock is trying to decide whether to purchase an existing company in a remote region of Argentina or build its own subsidiary. Keith Moon, Blickinstock's vice president of global business development, will be making a presentation to the board outlining the company's options. -Blickinstock has identified a company that would be open to merger or acquisition. Which of the following is a reason to go ahead with the merger?

Scenario: Global Manufacturing, Inc. (GMI) GMI is a fast-growing U.S. company that wants a production system that makes each of its product's two components in the location where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI purchased an existing company in Brazil to produce component A and built a subsidiary in Thailand to produce component B. -GMI's expansions into Brazil and Thailand would appear in the ________.

Scenario: Blickinstock at the Crossroads Auto parts supplier, Blickinstock Ltd., would like to expand its presence in Latin America. To that end, Blickinstock is trying to decide whether to purchase an existing company in a remote region of Argentina or build its own subsidiary. Keith Moon, Blickinstock's vice president of global business development, will be making a presentation to the board outlining the company's options. -Why should Blickinstock consider building its own subsidiary?

Which of the following factors reduces the appeal of purchasing existing facilities?

Distinguish between the different advantages identified by the eclectic theory.

At the core of foreign direct investment are international flows of capital.

When companies realized they could produce in the most efficient and productive locations in the world and simply export to markets worldwide, a new surge of foreign direct investment flowed into ________.

The practice of "following clients" can be expected in industries where many component parts are obtained from suppliers with whom a manufacturer has a close working relationship.

The capital account is a national account that records transactions involving the import and export of goods and services, income receipts on assets abroad, and income payments on foreign assets inside the country.