In Which Way Can the Source Country's Balance of Payments

question 39

Multiple Choice

In which way can the source country's balance of payments benefit from an FDI made in a foreign country?

• A) From cash outflow during the initial investment to finance the FDI
• B) If the purpose of the foreign investment is to serve the home market from a low-cost production location
• C) From the inward flow of foreign earnings
• D) If FDI is a substitute for direct exports

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Definitions:

Evolutionary Theory

A scientific theory explaining the process by which species undergo genetic changes over generations, leading to diversity of life.

Evolutionary Perspective

A theoretical approach that explains psychological traits as adaptations that have evolved to solve recurrent problems in human ancestral environments.

Triangular Theory

A theory, often related to love, that proposes three components (intimacy, passion, and commitment) are necessary for complete love.

Social Exchange Theory

A theory which maintains that people provide help to someone else when the benefits of helping and the costs of not helping outweigh the potential costs of helping and the benefits of not helping.