111.Which of the following statements is most likely to be true regarding the adverse effects of FDI on the host country? 

A. It decreases the level of competition in the host country.

B. It tends to increase the prices of the products.

C. It leads to a high rate of unemployment in the long run.

D. When a foreign subsidiary imports a substantial number of its inputs from abroad, it results in a debit on the current account of the host country’s balance of payments.

E. When a foreign subsidiary sends its profits to its home country, it results in the depletion of gold reserves of the host country.

112.The most important concerns regarding the costs of FDI for the home-country center on: 

A. the balance-of-payments and employment effects of outward FDI.

B. the technology capture effect and the perceived loss of national sovereignty.

C. the reverse-resource transfer effect and the exposure to foreign markets caused by FDI.

D. the import of substantial input from abroad and being held to “economic ransom.”

E. the exposure to foreign markets and the decreased costs of production.

113.Offshore production refers to FDI undertaken: 

A. to focus on extractive industries, such as oil and gas.

B. to serve the home market.

C. in shipping industries.

D. to decrease the prices of products in the host countries.

E. to capture tax benefits in the host country.

114.Which of the following is a major type of foreign investment risk that is insurable through government-backed programs? 

A. Lack of funds

B. Risk of transaction loss

C. Poor strategic tie-ups

D. Risks of expropriation

E. Losses due to natural calamities

115.As an incentive to encourage domestic firms to undertake FDI, many countries have: 

A. eliminated double taxation of foreign income.

B. started imposing local content requirements.

C. imposed higher import tariffs.

D. abolished the use of custom duties.

E. eliminated subsidies.

116.Which of the following is a home-country policy for limiting outward FDI? 

A. Eliminating double taxation of foreign income

B. Manipulating tax rules to encourage the firms to invest at home

C. Withdrawing government-backed insurance programs provided to local investors

D. Reducing interest rates earned on domestic investments

E. Prohibiting organizations from entering into a cartel

117.To encourage inward FDI, it is increasingly common for governments to: 

A. offer tax concessions to firms that invest in their countries.

B. exclude foreign companies from specific industries.

C. require that local investors own significant proportion of the equity in a joint venture.

D. impose high custom duties on foreign firms.

E. prohibit MNEs from joining a cartel.

118.Host governments use a range of controls to restrict inward FDI. The two most common are: 

A. monetary restraints and prohibition on investing in certain countries.

B. voluntary export restrictions and employment restraints.

C. ownership restraints and performance requirements.

D. tax concessions and government-backed insurance.

E. employment restraints and tax deductions.

119.Many services have to be produced where they are sold; hence _____ is not an option. 

A. FDI

B. franchising

C. greenfield investment

D. exporting

E. outsourcing

120.Firms for which licensing is not a good option include: 

A. low-technology industries.

B. global oligopolies.

C. industries characterized by low cost pressures.

D. industries where transportation costs are high.

E. industries which need to have low control over foreign operations.