Intuitively explain how migration of capital (FDI) can lead to economy-wide gains for both Home and Foreign. You may want to use a graph of a capital market, with rental rate curves (=marginal product of capital) for both Home and Foreign, and comparing a pre-FDI situation and a free-FDI equilibrium.

Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter16: Creating An Environment For Growth And Prosperity
Section: Chapter Questions
Problem 14CQ
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Intuitively explain how migration of capital (FDI) can lead to economy-wide gains for both Home and Foreign. You may want to use a graph of a capital market, with rental rate curves (=marginal product of capital) for both Home and Foreign, and comparing a pre-FDI situation and a free-FDI equilibrium.
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