Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 31, Problem 3PA
To determine
The difference between foreign direct investment and foreign portfolio investment.
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Describe the difference between foreign direct investment and foreign portfolio investment. Who is more likely to engage in foreign direct investment – a corporation or an individual investor? Who is more likely to engage in foreign portfolio investment?
What is the difference between foreign direct investment and foreign portfolio investment.
How do changes in local real interest rates and foreign interest rates impact the decision to carry out investment by (i) foreigners and (ii) locals.
Which of the following would be U.S. foreign direct investment?
A.
A U.S. canning factory opens a plant in Ecuador.
B.
A Bolivian bank buys U.S. corporate bonds.
C.
A Polish company opens a shipbuilding plant in the United States.
D.
A U.S. bank buys Bolivian corporate bonds.
Chapter 31 Solutions
Principles of Economics (MindTap Course List)
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- What is the difference between foreign direct investment and portfolio investment?arrow_forwardExplain four factors why China is among the huge recipients of foreign direct investment.arrow_forwardProvide two ways in which the criteria for investing differ between Foreign Direct Investment and Foreign Portfolio Investment?arrow_forward
- What are the benefits and costs associated with foreign portfolio investment (FPI)?arrow_forwardWhich of the following is an example of U.S. foreign portfolio investment? Select one: a.Erica, a U.S. resident, buys bonds issued by the Swiss government. b.Neither A nor B are examples of U.S. portfolio investment. C.A U.S. legal office opens a branch office in Holland. d.Both A and B are examples of U.S. portfolio investment.arrow_forwardWhich is an example of foreign portfolio investment? a. Australian tourists going on a safari in Kenya. b. Indonesian merchants selling coffee beans to Japanese importers. c. US consumers increasing their demand for German automobiles. d. Brazilian banks using pesos to buy stock in Mexican corporations.arrow_forward
- What are the trends regarding foreign direct investment (FDI) in the world economy?arrow_forwardWhat is Foreign Direct Investment (FDI) all about?arrow_forwardWhich scenario best demonstrates foreign direct investment? Salia started a Polish restaurant in her home country, the United States, after she took cooking lessons from a well-known chef in Poland. Super Blooms, a reputable vegetable plant company in Holland, exports tomato, pepper, and potato garden plants across the globe. Ups n Downs Inc., a Chinese firm, supplies roller coaster components in the United States. Domesticity, a U.S.-based office furniture company, has set up its own assembly plant in Japan to cater to the needs of the Asian market. Lux Linens, a fabric conglomerate in the United States, imports raw silk from China and Italy.arrow_forward
- Which of the following are direct foreign investments, and which are not? Event a. A French company merges with an American company; stockholders in the U.S. company exchange their stock for shares in the French firm. b. The same Saudi businessman buys a New York apartment building. c. A Saudi businessman buys $10 million of IBM stock. Is this a direct foreign investment? d. An Italian firm builds a plant in Russia and manages the plant as a contractor to the Russian government. Yes Yes No Noarrow_forwardWhich of the following are direct foreign investments? Explain your answer. i. A Chinese company pays $6.49 million for a stake in the Hilton. ii. A Russian businessman buys $44 billion on FOREX. iii. An American company buys another American company; stockholders in the bought-US company sell their shares on FOREX. iv. A Turkish company builds a factory in Ethiopia and manages the factory as a contractor to the Turkish government.arrow_forwardExplain briefly what international investment law does. Why is it important? Is it a good or bad thing?arrow_forward
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