IGCSE Development Studies: Specimen Questions with Answers 47 - 48 of 98

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Understand by Globalization

Question 47 (5 of 8 Based on Passage)

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Give two benefits of debt relief.

Explanation

Debt relief is the partial or total relief from debts especially to those developing countries who owe debt to external creditors. By definition “it is the reorganization of debt in any form with the aim of providing relief either partial or in full from a financial burden.” Debt relief will only be considered by the creditors if there is no other better alternative than the relief of debt

  • Debt relief helps companies to invest money into development projects such as industry.
  • Through debt relief some of the countries have used this opportunity of saving money in improving the quality of life of the people.

Question 48 (6 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.

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