In the shortrun (specific factors) model, FDI will
Cause _______________ in the return to capital and
Land and _______________ in the return to labor in
The recipient country.
A)an increase; a decrease
B)a decrease; an increase
C)no change; an increase
D)a decrease; no change

Question

In the short­run (specific factors) model, FDI will
Cause _______________ in the return to capital and
Land and _______________ in the return to labor in
The recipient country.
A)an increase; a decrease
B)a decrease; an increase
C)no change; an increase
D)a decrease; no change

Quizplus · Accepted Answer

According to the specific factors model, FDI will increase the return to capital and decrease the return to labor in the recipient country. This is because FDI tends to bring in more capital-intensive production processes, leading to an increase in demand for capital and a decrease in demand for labor. Therefore, choice B is the best answer as it correctly reflects the specific factors model.

In the Short­run (Specific Factors) Model, FDI Will

In the Shortrun (Specific Factors) Model, FDI Will