Which of the following is most likely to be an impact of FDI?
A)There may arise temporary unemployment in the home country.
B)The rental rate of capital declines in the home country.
C)The wage rate declines in the host countries.
D)Government revenue of the home country increases.

Question

Quizplus · Accepted Answer

FDI can lead to temporary unemployment in the home country as companies may choose to relocate their operations to the host country where labor costs are cheaper. However, this impact can be offset in the long term through the creation of new job opportunities in the home country as the host country's market expands. The rental rate of capital may also decline in the home country due to reduced demand for capital. The wage rate may decline in the host countries due to increased competition for jobs, but this is not a certain outcome. Government revenue of the home country can increase if FDI results in increased profits and tax revenue for the company, which is then paid to the government in the form of taxes. However, this impact is also not a guarantee.

Which of the Following Is Most Likely to Be an Impact