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Question 1

What is Foreign Direct Investment (FDI)?

Answer 1

Investment made by a company or individual in one country in business interests in another country

FDI typically involves acquiring a lasting interest in a foreign business.

Question 2

What are the two main forms of FDI?

Answer 2

• Greenfield investment
• Mergers and acquisitions

Greenfield investment refers to establishing a new operation in a foreign country, while mergers and acquisitions involve buying or merging with an existing foreign company.

Question 3

What is a Greenfield investment?

Answer 3

Investment where a company builds a new facility from the ground up in a foreign country

This type of investment allows for complete control over the new operation.

Question 4

What are mergers and acquisitions?

Answer 4

Forms of investment where a company buys or merges with an existing foreign business

This can lead to immediate access to existing infrastructure and market presence.

Question 5

What is the primary motive for companies to engage in FDI?

Answer 5

To gain access to new markets, resources, and strategic assets

Companies may also seek to diversify their operations and reduce risk.

Question 6

True or False: FDI can lead to job creation in the host country.

Answer 6

True

FDI often results in new jobs as foreign companies establish operations in the host country.

Question 7

Fill in the blank: FDI can also help in the transfer of _______ and technology between countries.

Answer 7

[capital]

This transfer can help improve productivity and innovation in the host country.

Question 8

What are some potential drawbacks of FDI for the host country?

Answer 8

• Profit repatriation
• Loss of domestic control
• Environmental concerns

These drawbacks can impact local economies and governance.

Question 9

What is profit repatriation?

Answer 9

The process of foreign companies transferring profits back to their home country

This can limit the economic benefits for the host country.

Question 10

What is the significance of government policies on FDI?

Answer 10

Government policies can either encourage or discourage FDI through regulations, incentives, and restrictions

Favorable policies can attract foreign investment, while unfavorable ones can deter it.

Question 11

What is a common reason for countries to attract FDI?

Answer 11

To stimulate economic growth and development

FDI can enhance infrastructure, create jobs, and increase competitive advantages in the global market.

Question 12

Fill in the blank: FDI is often influenced by _______ factors such as political stability and economic conditions.

Answer 12

[environmental]

These factors can significantly impact the decision-making process of potential investors.