test 2

Question 1

Foreign direct investment

Answer 1

purchase of physical assets or a
significant amount of the ownership (stock) of a company in another
country to gain a measure of management control
Cutoff is 10% investment
Foreign direct investment is different from portfolio investment,
which refers to investment that does not involve obtaining a degree
of control in a company

Question 2

Greenfield investment

Answer 2

the establishment of manufacturing plants,

marketing subsidiaries, or other facilities abroad.

Question 3

Acquisition

Answer 3

A direct investment or purchase an existing company

or facility.

Question 4

Merger

Answer 4

A special type of acquisition in which two firms join to

form a new, larger company

Question 5

Flow of FDI:

Answer 5

the amount of FDI undertaken over a given time

period

Question 6

Current

Account

Answer 6

National account that records transactions
involving the export and import of goods
and services, income receipts on assets
abroad, and income payments on foreign
assets inside the country

Question 7

Capital

Account

Answer 7

National account that records transactions

involving the purchase and sale of assets

Question 8

Reasons for Intervention by the Host Country

Answer 8

Control balance of payments

Obtain resources and benefits

Question 9

When a U.S. company purchases a French company in France, the U.S. balance of payments account records the transaction as an

Answer 9

outflow of capital with a minus sign

Question 10

The capital account in one country’s balance of payments records transactions of exports and imports.

Answer 10

false

Question 11

A current account deficit (or trade deficit) occurs when a country exports more goods and receives more income from abroad than it imports and pays abroad.

Answer 11

false

Question 12

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

Answer 12

income receipts account and given a plus sign

Question 13

What of the following is not the reason that a home country blocks FDI outflow?

Answer 13

FDI outflow discourages cooperation between countries

Question 14

Building a subsidiary abroad from the ground up is called a greenfield investment.

Answer 14

true

Question 15

Which of the following is a reason behind intervention by a host country on matters related to FDI?

Answer 15

to keep their balance of payments under control