INBU 3301 - MRU exam with complete solution 2024_2025.
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Course
INBU 3301
Institution
INBU 3301
benefits to host country of FDI
1. Resource transfer effects
2. Employment effects
3. Balance of Payments Effects
The costs of FDI to a host country include...
1. Adverse effects of FDI on domestic companies within the host nation
2. Adverse effects on the Balance of Payments
3. Po...
INBU 3301 - MRU exam with complete
solution 2024/2025
benefits to host country of FDI
1. Resource transfer effects
2. Employment effects
3. Balance of Payments Effects
The costs of FDI to a host country include...
1. Adverse effects of FDI on domestic companies within the host nation
2. Adverse effects on the Balance of Payments
3. Possible Effect on national sovereignty and autonomy
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Home Country Benefits of FDI
1. inward flow of foreign earnings as profits are repatriated
2. creates a demand for home country exports of capital equipment
3. learn valuable skills from foreign markets
Home Country FDI Costs
1. The home-country's balance of payments can suffer
2. Employment may also be negatively affected if the FDI replaces domestic
production
Outflows of FDI
flow of FDI out of a country
Inflows of FDI
flow of FDI into a country
Regional Economic Integration
agreements between countries in a geographic region to reduce tariff and non-tariff
barriers to the free flow of goods, services, and factors of production between each
other
Levels of Regional Integration
1. Free Trade Area
,2. Customs Union
3. Common Market
4. Economic Union
5. Political Union
Regional Economic Integration: Benefits
- Trade creation
- Political power
- Political cooperation
Regional Economic Integration: Drawbacks
- trade diversion
- shifting employment
- Lost sovereignty
The Euro - Advantages
- Price transparency: easier to compare prices
- Lowering transactions costs: avoid costs of changing currencies
- Increasing trade within the Eurozone
- Eliminate exchange rate fluctuations
The Euro - Disadvantages
- Countries lose their ability to control fiscal and monetary policy
- EU is not an optimal currency area
Optimal Currency Area
The geographic area in which a single currency would create the greatest economic
benefit
Internalization Theory
The argument that firms prefer FDI over licensing in order to retain control over know-
how, manufacturing, marketing, and strategy or because some firm capabilities are not
amenable to licensing.
- Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico,
New Zealand, Peru, Singapore and Vietnam.
The European Union
- an economic and political union (28 countries)
- allows free trade
- allows free movement of people
Five Key EU Institutions
1. The European Commission
2. The European Council
3. The Council of Ministers
4. The European Parliament
5. The Court of Justice
European Free Trade Association (EFTA)
, - Feared lost sovereignty
- Feared destructive rivalry
- Desired free-trade gains
- Cooperates with EU
- Iceland, Liechtenstein, Norway, Switzerland
The Comprehensive Economic and Trade Agreement (CETA)
- aspects of Canada-EU trade
- free trade agreement
- eliminate or reduce barriers
North American Free Trade Agreement (NAFTA)
Agreement that created a free-trade area among the United States, Canada, and
Mexico.
Asia-Pacific Economic Cooperation (APEC)
Group of 21 nations ringing the Pacific Ocean that accounts for over half of world trade
- Not designed as a free-trade bloc
- Strengthen multilateral trade system
- Liberalize trade and investment rules
Andean Community
- Colombia, Ecuador, Peru, and Bolivia
- operates as a customs union
- agreement with Mercosur to restart negotiations towards the creation of a free trade
area
Mercosur
- Brazil, Argentina, Paraguay and Uruguay
- originated as a free trade pact between Brazil and Argentina
- may be diverting trade rather than creating trade
Central America Free Trade Agreement (CAFTA-DR)
- Free trade agreement
- A treaty under international law
- United States and Central American countries;
• Costa Rica
• El Salvador
• Guatemala
• Honduras
• Nicaragua
▫︎The Dominican Republic joined later
Association of Southeast Asian Nations (ASEAN)
- wants to foster freer trade between member countries and to achieve some
cooperation in their industrial policies
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