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:

Modern-day

Pertaining to the present time or the current era, often used to contrast with historical periods.

Sponges

Simple aquatic animals belonging to the phylum Porifera, characterized by their porous bodies that filter nutrients from water.

Geological Eon

A major division of geological time, lasting billions of years, that divides Earth's history into significant phases.

Archean

A geological eon extending from about 4.0 to 2.5 billion years ago, characterized by the formation of the Earth's first stable continental crust.