Deck 12: International Resource Movements and Multinational Corporations

Question 1

Portfolio investments refer primarily to:

A)direct investments
B)bonds
C)liquid assets
D)short-term assets

Answer 1

B

Question 2

Transfer pricing refers to:

A)risk diversification
B)the pricing of the technology transferred
C)the artificial overpricing of components shipped to an affiliate in a higher tax nation
D)portfolio theory

Answer 2

C

Question 3

Which of the following is not true with regard to direct investments?

A)U.S.direct investments abroad and foreign direct investments in the U.S.grew very rapidly from 1980 to 2017
B)the amount of U.S.direct investments abroad is similar to the amount of foreign direct investments in the U.S.
C)U.S.direct investments in Canada are higher than in Europe
D)U.S.private holdings of foreign long-term securities grew very rapidly from 1980 to

Answer 3

C

Question 4

Owners of capital in developing countries generally

A)oppose an inflow of foreign direct investments from abroad
B)favor an inflow of foreign direct investments from abroad
C)are indifferent to foreign direct investments from abroad
D)we cannot say without additional information

Question 5

Which is not a reason for private foreign direct investments?

A)horizontal and vertical integration
B)to maximize profits and diversify risks
C)to stimulate development
D)to avoid tariffs

Question 6

Two-way international capital flows can be explained by the desire to:

A)earn higher yields abroad
B)avoid tariffs
C)diversify risks
D)all of the above

Question 7

The basic reason for the existence of MNC is the:

A)competitive advantage of a global network of production and distribution.
B)incentives provided by the investing nation
C)incentives provided by the host nation
D)imperfections of international capital markets

Question 8

Which of the following is not a beneficial effect of direct investments on the investing country:

A)the transfer of technology
B)higher profits
C)risk diversification
D)avoids the possible loss of export markets

Question 9

Labor in developing countries generally

A)opposes an inflow of foreign direct investments from abroad
B)favors an inflow of foreign direct investments from abroad
C)is indifferent to foreign direct investments from abroad
D)we cannot say without additional information

Question 10

U.S.labor generally

A)opposes U.S.investments abroad
B)favors U.S.investments abroad
C)is indifferent to U.S.investments abroad
D)we cannot say without additional information

Question 11

Direct investments usually involve the transfer of:

A)capital
B)technology
C)management
D)all of the above

Question 12

Foreign direct investment benefits the host nation because it:

A)increases the K/L ration
B)increases the productivity of labor
C)increases per capita income
D)all of the above

Question 13

The reason the residents of a nation do not borrow from other nations and themselves undertake real investments in their own nation is that:

A)multinationals want to retain control over their own technology
B)banks do not want to lend to foreigners
C)vertical integration is not possible for foreigners
D)multinationals want to avoid horizontal integration

Question 14

The brain drain refers to the transfer of:

A)technology from developed to developing nations
B)skilled labor and professionals from developed to developing nations
C)unskilled labor from developing to developed nations
D)skilled labor and professionals from less advanced to more advanced nations

Question 15

Portfolio theory tells us that by investing in securities with yields that are inversely related over time:

A)a given yield can be obtained at a smaller risk
B)a higher yield can be obtained for the same level of risk
C)a two-way capital flow may be required to achieve a balanced portfolio
D)all of the above