mr smith-effects of MNCs

Question 1

what is a multinational cooperate

Answer 1

business that has branches or different departments in more than on country

Question 2

positive effects of multinational corperations

Answer 2

-create jobs, increasing empolyment for local labour
-increases local standars of living especially in lower income counteries, they get a better wage and workign standards

Question 3

negative effects of multinational corporations

Answer 3

increased competion for staff, may make wages increase, forcing local firms to lose staff to teh MNC
local peopel might start buying from MNCs rather then local firms
could force lcoal firms out of the business
reduce amoutn comign into economy

Question 4

MNCS pay tax to their host nations

Answer 4

if busienss has control off departments in otehr counteries
it must pay tax to the government e.g exports etc
means increse a=tax government revenue
busienss could use strategies to reduce amount of tex they need to pay=tax avoidance
one method is transfer pricing

Question 5

transfer pricing

Answer 5

setting the price itsells products for betweeen different parts of the MNC
might locate areas with low tax rate
it has moved from a high tex rate to low tax rate for MNCS
at the end, more money in cocuntry with low tax rate so they have to pay less tax overall to government

Question 6

what is balance of payments

Answer 6

difference between total value of payments into and out of a country over a period of time
when MNC invests into a country, it causes FDI inflows, iproving a countries balance of payments

Question 7

negative impacts of MNCS

Answer 7

cause money to leave the national economy, have negative effect on host nations balance of payments

can force domestic firms out of business by offering better services to consumers
short term-good for staff as get better job
long term-bad as dont have as many choices of places to work/loss of tax payments to government

Question 8

controlling MNCS

Answer 8

govenrmenst try to controll MNCs so that it doesnt have negative effect on economy

my be through legal control (changes in the law) or political infleunves (changes to policies)

Question 9

how can legislation influence behaviour of MNCS

Answer 9

-govenments can change tarrifs and quotas
e.g govenment increasing tarrifs on imported raw materials tp encourage MNCS to use the resources from within the country