Chapter 20.2, Problem 2R

To determine

To analyse: The effect of the foreign investment on U.S economy and the U.S investment on elsewhere.

Explanation of Solution

Following are the three effects of foreign investment in the U.S and U.S foreign investment on other country.

	DFI into the U.S	DFI by the U.S
1	Highly-compensated jobs: The DFI will open new jobs in the U.S as DFI will rise the number of firm operating in the U.S	Formation of human resources: Especially in less developed countries, DFI by the U.S will raise the access to new way of learning skills due to which the human inelegance, skills, talent will increase.
2	Spurring innovation: U.S will get new technology by DFI as there will be spill over of knowledge	Rise in competition: The DFI will break the monopoly power as it will infuse new competitors in the market.
3	Driving export: The market size will become broader by the DFI as it will lead to a production of commodities in lower cost due to which customer can buy it at lower cost and hence, enhance the number of customers in the U.S market.	Technical know-how: Since, U.S has most advanced technology as compared to other countries, the DFI by U.S will lead to a spread of knowledge to those countries.