Suppose both goods and financial markets are segmented across national borders but are otherwise efficient. Then, multinational corporations may be able to reduce their cost of capital through foreign direct investment.

Question

Quizplus · Accepted Answer

Multinational corporations can reduce their cost of capital through foreign direct investment because they can access capital at a lower cost in countries where interest rates are lower or where financing is more readily available. This helps them to finance their projects at a lower cost and potentially earn higher profits.

Suppose Both Goods and Financial Markets Are Segmented Across National