In the long run, if all resources can move within a nation, an inflow of FDI will:
A) increase production in the capital-intensive sectors as capital becomes cheaper.
B) increase production in the labor-intensive sector as capital becomes less desirable.
C) lower wages.
D) decrease the production of capital-intensive goods.

Question

Quizplus · Accepted Answer

If all resources can move within a nation, an inflow of FDI will increase the supply of capital in the capital market, which will lower the cost of capital. As a result, industries that are capital-intensive will become more profitable, leading to an increase in production in capital-intensive sectors.

In the Long Run, If All Resources Can Move Within