Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781305176799
Author: Gwartney
Publisher: Cengage
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Chapter 19, Problem 8CQ
To determine
Impact of foreign capital inflow on the economy's capital formation.
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Chapter 19 Solutions
Macroeconomics: Private and Public Choice
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- Assume that you are a senior manager in a U.S. automobile company considering investing in production facilities in China, Russia or Germany. These facilities will serve the local market demand. Evaluate the benefits, costs, and risks associated with doing business in each nation. Which country seems to be the most attractive target for foreign direct investment? Why?arrow_forwardThe Tulu Island economy is experiencing an inflow of foreign investment capital associated with a trade deficit. Foreign investors are making long-term direct physical capital investments in Tulu's business community at a record pace. Relate whether there is cause for concern in this case, and briefly explain your answer.arrow_forwardDescribe 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?arrow_forward
- Provide two ways in which the criteria for investing differ between Foreign Direct Investment and Foreign Portfolio Investment?arrow_forwardwhen a domestic investor buys a foreign asset, the financial account would rise, stay the same or fall?arrow_forwardIf you were a foreign investor, would you want to invest in a consumer electronics company in Japan? Does the fact that the company has had past problems requiring government intervention affect your initial decision? How does it impact your decision that you would be competing with a government-backed company during the bid process?arrow_forward
- Greenfield investments are different from the Acquisition of a company in the host country. Are you agree with this statement? What are the advantages and disadvantages of investing in the foreign market through Greenfield foreign direct investment compared to other business forms in a foreign country?arrow_forwardSuppose that global investors fear a less friendly environment in Argentina in the face of elevated government default risk. Explain how this will affect capital investment, real GDP growth, and the current (trade) account in Argentina. What, if any, are the tradeoffs?arrow_forwardIf U.S. goods were more desirable in the rest of the world than they used to be, how would NCO and the balance of trade be affected? Net capital outflow and the balance of trade would increase There would be no change in net capital outflow and the balance of trade. Net capital outflow and the balance of trade would decreasearrow_forward
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