INBU 3301 – MRU VERIFIED ACCURATE STUDY GUIDE
Benefits to host country of fdi - answers - 1. Resource transfer effects
2. Employment effects
3. Balance of payments effects
The costs of fdi to a host country include... - answers - 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
Home country benefits of fdi - answers - 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 - answers - 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 - answers - flow of fdi out of a country
Inflows of fdi - answers - flow of fdi into a country
Regional economic integration - answers - 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 - answers - 1. Free trade area
2. Customs union
3. Common market
4. Economic union
5. Political union
Regional economic integration: benefits - answers - - trade creation
- political power
- political cooperation
Regional economic integration: drawbacks - answers - - trade diversion
- shifting employment
- lost sovereignty
The euro - advantages - answers - - 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 - answers - - countries lose their ability to control fiscal and
monetary policy
- eu is not an optimal currency area
Optimal currency area - answers - the geographic area in which a single currency would
create the greatest economic benefit
Internalization theory - answers - 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) -
answers - trade agreement between australia, brunei, canada, chile, japan, malaysia,
mexico, new zealand, peru, singapore and vietnam.
The european union - answers - - an economic and political union (28 countries)
- allows free trade
- allows free movement of people
Five key eu institutions - answers - 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) - answers - - feared lost sovereignty
- feared destructive rivalry
- desired free-trade gains
- cooperates with eu
- iceland, liechtenstein, norway, switzerland
The comprehensive economic and trade agreement (ceta) - answers - - aspects of
canada-eu trade
- free trade agreement
- eliminate or reduce barriers
North american free trade agreement (nafta) - answers - agreement that created a free-
trade area among the united states, canada, and mexico.
Asia-pacific economic cooperation (apec) - answers - group of 21 nations ringing the
pacific ocean that accounts for over half of world trade
- not designed as a free-trade bloc
Benefits to host country of fdi - answers - 1. Resource transfer effects
2. Employment effects
3. Balance of payments effects
The costs of fdi to a host country include... - answers - 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
Home country benefits of fdi - answers - 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 - answers - 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 - answers - flow of fdi out of a country
Inflows of fdi - answers - flow of fdi into a country
Regional economic integration - answers - 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 - answers - 1. Free trade area
2. Customs union
3. Common market
4. Economic union
5. Political union
Regional economic integration: benefits - answers - - trade creation
- political power
- political cooperation
Regional economic integration: drawbacks - answers - - trade diversion
- shifting employment
- lost sovereignty
The euro - advantages - answers - - 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 - answers - - countries lose their ability to control fiscal and
monetary policy
- eu is not an optimal currency area
Optimal currency area - answers - the geographic area in which a single currency would
create the greatest economic benefit
Internalization theory - answers - 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) -
answers - trade agreement between australia, brunei, canada, chile, japan, malaysia,
mexico, new zealand, peru, singapore and vietnam.
The european union - answers - - an economic and political union (28 countries)
- allows free trade
- allows free movement of people
Five key eu institutions - answers - 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) - answers - - feared lost sovereignty
- feared destructive rivalry
- desired free-trade gains
- cooperates with eu
- iceland, liechtenstein, norway, switzerland
The comprehensive economic and trade agreement (ceta) - answers - - aspects of
canada-eu trade
- free trade agreement
- eliminate or reduce barriers
North american free trade agreement (nafta) - answers - agreement that created a free-
trade area among the united states, canada, and mexico.
Asia-pacific economic cooperation (apec) - answers - group of 21 nations ringing the
pacific ocean that accounts for over half of world trade
- not designed as a free-trade bloc
