A Fast-Growing Form of Foreign Direct Investment Is Sovereign Wealth

question 164

Multiple Choice

A fast-growing form of foreign direct investment is sovereign wealth funds (SWFs) . Why do these investments by governments with surplus cash flows worry trade experts?

• A) SWFs invest in high-risk start-ups with no proven history of producing goods and services that developing or developed countries need. They may likely undermine the years of development of growing economies.
• B) SWFs have a greater risk of going bankrupt than other investments because governments are not good at running businesses.
• C) Some fear that governments investing their SWFs in large firms may gain control of natural resources, sensitive technologies, and the decision making of management.
• D) Some trading experts believe that SWFs are supported by terrorist organizations, and their strategy is an indirect way to undermine the creation of U.S. jobs.

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Definitions:

Closure

A psychological term referring to the need for an individual to seek a resolution or an understanding to a traumatic or unsettling event or experience.

Brightness Constancy

The human visual system's ability to perceive the brightness of an object as the same under varying lighting conditions.

Ratio

A mathematical term defining the quantitative relationship between two numbers, showing how many times one value contains or is contained by the other.

Linear Perspective

A technique in art and photography that creates the illusion of depth on a flat surface, using converging lines to depict objects more distant as smaller.