Multinational Corporations in Globalization Questions and Answers
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Course
MNC
Institution
MNC
Multinational Corporations in Globalization Questions and Answers
Multinational Corporation MNC
A large business organization operating in a number of different national economies.
What happens to MNCs in times of globalization?
They have an increased role.
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Multinational Corporations in
Globalization Questions and Answers
Multinational Corporation MNC - answer A large business organization operating in a
number of different national economies.
What happens to MNCs in times of globalization? - answer They have an increased
role.
What will an increased role of MNCs lead to? - answer An injection of FDI in other
countries, particularly LDCs where labour and environmental regulations are less
prominent.
What are the effects of FDI? - answer A positive multiplier effect =
growth, employment, inflation.
Examples of MNCs - answer Nike, Sony, Apple, Toyota, Coca-Cola
Advantages of MNCs - Balance of Payments - answer Multinationals provide an
inflow of capital into the developing country. E.g. the investment to build the factory is
counted as a capital flow on the financial account of the balance of payments. This
capital investment helps the economy develop and increase its productive capacity.
The inflows of capital help to finance a current account deficit. (Basically, this means
that foreign investment enables developing countries to buy imports
Advantages of MNCs - Employment - answer Investment provides demand for
labour, although poorly treated, and growth reduces cyclical unemployment.
Advantages of MNCs - How have liberal economists defended sweatshop labour? -
answer Paul Krugman and Jeffrey Sachs have argued that although employers are
paying too low wages. Often sweatshop labour is better than the alternative ofno paid
employment. Economies in south-east Asia have seen rising wages in recent decades -
showing that low wage economies can develop
Advantages of MNCs - Infrastructure - answer Multinational firms may help improve
infrastructure in the economy. They may improve the skills of their workforce. Foreign
investment may stimulate spending in infrastructure such as roads and transport.
Disadvantages of MNCs - Environment - answer Multinational companies can
outsource parts of the production process to developing economies with weaker
environmental legislation
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