Which of the following is a reason behind intervention by a host country on matters related to FDI?
A) to keep their balance of payments under control
B) to protect their outdated technology and management skills
C) to strictly encourage the establishment of sunset industries
D) to decrease the country's competitiveness in the global market

Question

Quizplus · Accepted Answer

Host countries may intervene in matters related to FDI to keep their balance of payments under control. This is because FDI can result in large inflows of foreign currency, which can put pressure on the host country's balance of payments by increasing the supply of the country's currency. By regulating the flow of FDI, the host country can manage its balance of payments and minimize the risks associated with currency fluctuations.

B, C, and D are not valid reasons for a host country to intervene in matters related to FDI. Protecting outdated technology and management skills, strictly encouraging sunset industries, and decreasing a country's competitiveness in the global market are all counterproductive and can negatively impact the host country's economic growth and development.

Which of the Following Is a Reason Behind Intervention by a Host