IGCSE Development Studies: Specimen Questions with Answers 46 - 47 of 98

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Understand by Globalization

Question 46 (4 of 8 Based on Passage)

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Explain the following:

Foreign investment

Explanation

Foreign investment: It is the flows of capital from one country to another in exchange for significant ownership stakes in domestic company or the assets of the domestic country. In foreign investment the foreigners take an active part in management as a part of their investment. It works both ways especially between countries of equal economic status.

There are four different types of foreign investment:

  • Foreign Direct Investment (FDI)
  • Foreign Portfolio Investment (FPI)
  • Official flows
  • Commercial loans

FDI occurs when a business invests in a company which is in another country. For private investment to be considered as FDI, the investing companies no less than 10 % of the shares that belong to the foreign company. The company that invest is known as the parent company on the other hand the foreign company is known as the subsidiary company.

Question 47 (5 of 8 Based on Passage)

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State 2 advantages and disadvantages of Globalization

Explanation

Advantages of Globalization

  • It helps other countries share information about technological developments to developing countries.
  • Globalization makes the economy of one country dependent on the economy of other countries.

Disadvantage of Globalization

  • Increased flow of skilled and non-skilled jobs from developed to developing nations as corporations seek out the cheapest labor
  • Corporate influence of nations states far exceeds that of civil society organizations and average individuals.

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