Question

In: Economics

Which of the following statements about foreign direct investment (FDI) are correct? Check all that apply....

Which of the following statements about foreign direct investment (FDI) are correct? Check all that apply.

______________________________________________________________________

The acquisition of a U.S. corporation by a German company is an example of European direct investment in the United States.

Direct investment between the United States and Japan to produce the same automobile is classified as conglomerate diversification.

FDI occurs when earnings of the parent company’s foreign subsidiary are reinvested in plant expansion.

FDI flows include purchases of U.S. government bonds by the Chinese government.

U.S. FDI includes purchases of foreign government bonds by U.S. investors.

Solutions

Expert Solution

Answer - The following options are correct -

Option A and C.

The acquistion of US corporation by a german company is an example of European direct invesment in US.

FDI occurs when the earnings of parents companies foreign subsidiary are reinvested in plant expansion.

The definition of conglomerate diversification has been given wrong. The products need to be diversified here. Investment in stocks and bonds is not FDI. Hence option A and C will be correct.


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