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
Answer: C
Q.2 The three disputes of FDI are over ______ .
A) Concern
B) Interest
C) Regard
D) Hobby
Answer: B
Q.3 The Treaty of Rome was signed in the year ______ .
A) 1959
B) 1957
C) 1956
D) 1955
Answer: B
Q.4 When did Austria join the European Union?
A) 1997
B) 1993
C) 1995
D) 1999
Answer: C
Q.5 For spreading information, the foreign policy decision-makers rely on _______ .
A) Bureaucrats
B) Politicians
C) Media
D) Public
Answer: C
Q.6 More expansion of foreign direct investment can boost __________ .
A) Money circulation
B) Demand
C) Employment
D) Unemployment
Answer: C
Q.7 How will the offer curve react when customers are heterogeneous?
A) Zero quadrant
B) Negative quadrant
C) Optimum quadrant
D) Positive quadrant
Answer: B
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
Answer: C
Q.9 Which industry will have a free entry?
A) Mineral mining
B) Cable television
C) T-shirt silk screening
D) Satellite radio
Answer: C
Q.10 What is it called when a country is specialised in a particular good and then it trades the good with other countries?
A) Agreement
B) Interdependence
C) Correlation
D) Dependence
Answer: B
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FAQs
– Foreign Direct Investment (FDI) is described as an investment by a company based in another country into a country's production or business. Foreign Institutional Investment (FII) is a type of investment fund that is based in a country other than the one where the investment is being made.
What is foreign investment class 10 mcq? ›
Answer. Foreign investment is when a company or individual from one nation invests in assets or ownership stakes of a company based in another nation.
What are the 2 most known types of FDI? ›
FDI can take two different forms: Greenfield or mergers and acquisitions (M&As).
- greenfield investment involves the creation of a new company or establishment of facilities abroad. ...
- mergers and acquisitions amounts to transferring the ownership of existing assets to an owner abroad.
Foreign Direct Investment (FDI) Occurs when a firm invests directly in a new facilities to produce or market in a foreign country.
What is FDI also called? ›
What is Foreign Direct Investment (FDI) According to the IMF and OECD definitions, direct investment reflects the aim of obtaining. a lasting interest by a resident entity of one economy (direct investor) in an enterprise that is. resident in another economy (the direct investment enterprise).
What is the difference between foreign direct investment and FDI? ›
FDI refers to the investment made by foreign investors to obtain a substantial interest in an enterprise located in a different country. FPI refers to investing in the financial assets of a foreign country, such as stocks or bonds available on an exchange.
What is foreign investment PDF? ›
Foreign direct investment (FDI) is the process whereby residents of. one country (the source country) acquire ownership of assets for the. purpose of controlling the production, distribution and other activities. of a firm in another country (the host country). 1.
What are examples of foreign direct investment? ›
An example would be McDonald's investing in an Asian country to increase the number of stores in the region. Here, a business enters a foreign economy to strengthen a part of its supply chain without changing its business in any way.
What is investment class 10 very short answer? ›
The money that is spent to buy assets such as land, building, machines and other equipment is called investment.
What are the 3 components of FDI? ›
FDI has three components: equity capital, reinvested earnings and intra-company loans.
Country-wise FDI Equity Inflow FY-2021-22:
Singapore (27.01%), USA (17.94%), Mauritius (15.98%), Netherland (7.86%) and Switzerland (7.31%) emerge as top 5 countries for FDI equity inflows.
What is FDI in USA? ›
Foreign direct investment (FDI) is investments made by foreign companies or individuals in the United States.
What does FDI do? ›
Foreign direct investment (FDI) is made when a business takes controlling ownership in a company, sector, individual, or entity in another country. Through FDI, foreign companies are directly involved with day-to-day tasks from the other country, resulting in a transfer of money, knowledge, skills, and technology.
What is FDI explained? ›
Foreign direct investment (FDI) is when an investor becomes a significant or lasting investor in a business or corporation in a foreign country, which can be a boost to the global economy.
What is foreign direct investment in macroeconomics? ›
Long definition. Foreign direct investment are the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.
Which of the following is an example of foreign direct investment? ›
Foreign direct investment examples include mergers and acquisitions, the construction of new facilities, and intra-company loans from entities from one country to another country.
What is direct investment in FDI? ›
Direct investment, or foreign direct investment, is designed to acquire a controlling interest in an enterprise. Direct investment provides capital funding in exchange for an equity interest without the purchase of regular shares of a company's stock.
