poor fdi Flashcards
FDI stands for which is an investment made by a firm in one country into a firm in another in order to gain over it.
FDI stands for Foreign Direct Investment which is an investment made by a firm in one country into a firm in another country in order to gain control over it.
How will an increase in productivity affect economic growth and development?
CAn increase in short-run aggregate supply, increasing economic growth
AAn increase in long-run aggregate supply, increasing economic growth
A country can promote FDI by either reducing
A country can promote FDI by either reducing corporation tax which means that firms can keep more of their profit or by reducing wage costs which will enable firms to make more profit .
In 2015, Indian firms across the country received:
In 2015, Indian firms received over $31 billion in Foreign Direct Investment.
What is the likely impact of a reduction in incomes?
A decrease in incomes means that consumers will be spending less money on goods and services. This will decrease consumption which is a component of AD meaning AD will also decrease.
Which of the following policies could be used by the Indian government to promote Foreign Direct Investment?
A country can promote FDI by either reducing corporation tax which means that firms can keep more of their profit or by reducing wage costs which will enable firms to make more profit.
Reducing the rate of corporation tax could mean that the government collects less ___. This means that they have less money to spend on development which may limit economic ___.
Two ways in which countries can promote FDI are:
Reducing corporation tax e.g. in 1990, India reduced the rate from 50% to 40%
2. Reducing wage costs e.g. in 2001, the Indian government made it easier for small firms to fire or sack workers which meant that they no longer were stuck paying unnecessary wages.
How much Foreign Direct Investment did Indian firms receive in 2015?
In 2015, Indian firms received £31 billion in Foreign Direct Investment.
However, promoting FDI may not lead to development. Reducing the minimum wage means that consumers will have lower which will reduce income revenues and limit economic growth and . Moreover, reducing corporation tax means that the government will receive less which means that they have less money to spend on .
However, promoting FDI may not lead to development. Reducing the minimum wage means that consumers will have lower incomes which will reduce income tax revenues and limit economic growth and development . Moreover, reducing corporation tax means that the government will receive less revenue which means that they have less money to spend on development
Which of the chains of reasoning below show how poor infrastructure can limit economic growth?
Poor infrastructure → Low productivity → Keeps LRAS to the left → Limits real GDP → Limits economic growth
Malawi is increasingly struggling to provide enough electricity for firms and consumers. The President has announced significant investment in the infrastructure required to produce more electricity. How is the improvement of infrastructure likely to affect Malawi?
The two chains of reasoning here are just the opposite of those for poor infrastructure: Improved infrastructure → Decreases costs → Right shift of SRAS → Decreases prices → Increases competitiveness → More profit → More corporation tax revenue → More government spending on development. Improved infrastructure → Higher productivity → Shifts LRAS to the right → Increases real GDP → Increases economic growth
Which of the following is not likely to promote Foreign Direct Investment?
A country can promote FDI by reducing wage costs or reducing corporation tax. Increasing the rate of income tax makes a country less attractive to foreign firms as consumers will be spending less and workers will have less incentive to work and so it is harder to find workers.
Which of the following is a disadvantage of a policy to promote Foreign Direct Investment by reducing the rate of corporation tax?
Reducing the rate of corporation tax could mean that the government collects less revenue from corporation tax. This means that they have less money to spend on development, which could limit economic development.
