Econ Homework Question?

Question

Foreign direct investment:

I. Increases the domestic country's stock of capital and therefore can increase productivity

II. Can bring new technologies to poorer countries

III. Causes some of the income earned from the investment to exit the country that received the investment

A. II only

B. I, II, and III

C. I and III only

D. II and III only

E. I only

Answer 1

Obviously its number B.  But its a mis-leading question since it doesn't cover the negative aspects such as foreign control of finance and resources, governmental influence, and market corruption.

Answer 2

All 3. FDI will involve building of factories etc so capital increases along with labour productivity. This may include new techniques/processes/machines that the country does not already have. Profits will remain with the FDI parent company though, and the invested country just gets the benefits of increased employment and labour income.