How Is the Adverse Effect of the Balance of Payments

question 73

Multiple Choice

How is the adverse effect of the balance of payments for the home country due to an FDI usually offset?

• A) By increased imports to the home country as a result of the FDI
• B) By the subsequent inflow of foreign earnings
• C) By substituting direct exports made earlier from the home country
• D) By further investments usually made to expand foreign operations

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Definitions:

Investment in Associate

Investment in another entity where the investor has significant influence over the investee but does not control or jointly control it, usually represented by ownership of 20% to 50% of the voting stock.

Share Capital

The funds raised by a company through the issuance of shares to investors, representing the equity stake of shareholders.

Retained Earnings

The portion of a company’s profits that is kept or retained and not distributed to shareholders as dividends.

General Reserve

Funds set aside from profits for undisclosed general purposes, serving as a buffer for future financial uncertainties or for any identified but not immediate needs.