Foreign direct investment typically occurs when
A) The earnings of the parent company are invested in plant expansion overseas
B) The parent company transfers jobs overseas
C) The parent company closes its foreign production plants
D) The parent company purchases bonds of foreign governments

Question

Quizplus · Accepted Answer

Foreign direct investment occurs when a parent company invests and establishes a controlling ownership in a foreign-based subsidiary. This investment can be in the form of expanding existing production facilities or establishing new ones, investing in local resources, or purchasing or creating a completely new firm. Transferring jobs or closing foreign production plants would not be considered foreign direct investment, while purchasing foreign government bonds would be considered indirect investment rather than direct investment.

Foreign Direct Investment Typically Occurs When