Exam 7: Foreign Direct Investment

When the balances of the current and capital accounts are not equal, the error is reported as a(n) ________.

Using any two of the four theories that appear in your text, explain why companies engage in foreign direct investment.

Which of the following is NOT part of the capital account?

A country's balance of payments is a national accounting system that records all payments to entities in other countries and all receipts coming into the nation.

Describe how the maquiladora concept works. What are the advantages and disadvantages of Mexico's maquiladora?

The number of ________ and their exploding value contribute to the growth in foreign direct investment flows.

The purchase of physical assets or a significant amount of ownership (stock) of a company in another country to gain a measure of management control is called ________.

The requirement that a sufficient portion of a product's content originate within a certain market to escape tariff charges is an example of a(n) ________.

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. -If Happyland is successful at attracting foreign investment, its value would appear in the country's ________.

According to the eclectic theory, which of the following advantages must be present for a company to undertake foreign direct investment?

A(n) ________ is the advantage that a company has due to its ownership of some special asset.

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

Rationalized production is a system of production in which each of a product's components is produced in the location where the cost of producing that component is lowest.

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 subsidiary for component B in Thailand can be best described as a(n) ________.

When a U.S. company buys 40 percent of the publicly traded stock of a French company on France's stock market, the U.S. balance of payments records the transaction as an ________.

Many early trade theories were created at a time when most factors of production either could not be moved or could not be moved easily across national borders.

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

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

One way a company can achieve market power is through ________.

A potential problem with a rationalized production model is that a work stoppage in one country can bring the entire production process to a standstill.