If we use the shortrun (specificfactors) model to
Model FDI movement from one nation to another, then
Wages in the recipient nation:
A)decline absolutely.
B)rise as a result of an increase in the MP of labor.
C)are not affected.
D)decline relatively, as capital competes with labor but not absolutely.

Question

If we use the short­run (specific­factors) model to
Model FDI movement from one nation to another, then
Wages in the recipient nation:
A)decline absolutely.
B)rise as a result of an increase in the MP of labor.
C)are not affected.
D)decline relatively, as capital competes with labor but not absolutely.

Quizplus · Accepted Answer

In the short-run specific-factors model, FDI increases the capital stock in the recipient nation, which raises the marginal product of labor (MP of labor) and thus increases wages.

If We Use the Short­run (Specific­factors) Model to

If We Use the Shortrun (Specificfactors) Model to