impact of mncs on the national economy

Question 1

what are the positive effects of MNCs on the government?

Answer 1

• FDI flows help improve infrastructure – new factories, transport networks
• Positive multiplier = creates new jobs giving higher incomes which increases spending
• Raises tax revenue for the Government that can be spent on hospitals, schools etc. = increased standard of living

Question 2

what are the negative effects of MNCS on the government?

Answer 2

• MNC profit outflows back to ‘home’ country in the long term
• Jobs created are low skilled
• Tax avoidance through transfer pricing = Move sales/profits to countries with the lowest tax rates
• Over-dependent on the MNC – if they leave, it can create a large gap in the economy

Question 3

what are the positive effects of MNCs on business culture?

Answer 3

• MNCs strive for progress, profitability
• Brings professionalism to the economy – processes and ways of doing things
• Raises the quality of home businesses

Question 4

what are the negative effects of MNCs on business culture?

Answer 4

• Not guaranteed – some MNCs are unethical in approaches, i.e. resources, finance
  Environmental damage
  Working conditions for workers

Question 5

what are the positive effects of mncs on consumers?

Answer 5

• choice
• greater quality, lower prices

Question 6

what are the negative effects of mncs on consumers?

Answer 6

• loss of culture
• consumer rebellion against corporate brands

Question 7

extra

Answer 7

= Export revenue – Import expenditure
One MNC in a small economy (measured by GDP) has a significant impact
FDI is a positive inflow and money earnt from goods exported is a positive inflow
BUT withdrawal of funds (profits sent back to home nation) or imports sucked in by MNCs creates a deficit
Deficit = weakens currency (can cause inflation)
Surplus = positive inflow, strengthens currency