Answer to Question #261287 in Macroeconomics for Juice

Question

Which of the following statements does not belong to the main benefits of foreign direct investment (FDI)?

• FDI creates new jobs and boosts government tax revenues.

• FDI creates positive knowledge spillovers.

• FDI brings competition and improves efficiency.

• FDI makes local firms more difficult to survive and thus destroys local jobs.

Answer 1

Foreign Direct Investment (FDI) is one of the activities performed by an open economy economy that allow people to borrow from foreign investor or invest in foreign projects.

FDI has numerous benefits for an economy, such that:

• It creates employment or job and it also increase government revenue.
• It helps to create positive spillover knowledge.
• It makes the markets to be more competitive.

But, one of its disadvantage is it increases foreign competition that arises difficulties for domestic firms to survive due to which it decreases local jobs sometimes.

Hence, the correct option is: d.