FDI or a foreign direct investment is a controlling stake (ownership) in a commercial enterprise located in a country by an entity based out of another country. This is different from a portfolio foreign investment with respect to the element of control. The latter kind of investment is only an unassertive investment in the securities of a foreign nation, like bonds and stocks.
The Financial Times gives a typical definition of control as the globally agreed threshold of 10% of the voting shares. However, this is often a cloudy area since even a smaller share would accord control in companies. An FDI includes mergers and acquisitions, construction of new facilities, intra-company loans, and reinvesting profits from foreign operations.
Given are some important MCQs on foreign direct investment to analyse your understanding of the topic. The answers are also given for your reference.
Foreign Direct Investment: MCQs
Q.1 The foreign direct investment includes _______ .
A) Intellectual properties
B) Human resources
C) Tangible goods
D) Intangible goods
Q.2 The three disputes of FDI are over ______ .
Q.3 The Treaty of Rome was signed in the year ______ .
Q.4 When did Austria join the European Union?
Q.5 For spreading information, the foreign policy decision-makers rely on _______ .
Q.6 More expansion of foreign direct investment can boost __________ .
A) Money circulation
Q.7 How will the offer curve react when customers are heterogeneous?
A) Zero quadrant
B) Negative quadrant
C) Optimum quadrant
D) Positive quadrant
Q.8 Which of the following are improved when capital and labour are moved internationally?
A) Economic growth gains
B) Capital gains
C) Gains from income
D) Gains from trade
Q.9 Which industry will have a free entry?
A) Mineral mining
B) Cable television
C) T-shirt silk screening
D) Satellite radio
Q.10 What is it called when a country is specialised in a particular good and then it trades the good with other countries?
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