IGCSE Economics Paper-2: Specimen Questions with Answers 18 - 19 of 100

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Passage

Total of credit side of the balance of payment should always equal the debit side.

Question 18 (2 of 5 Based on Passage)

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Short Answer▾

Explain the merits of MNC to the host country.

Explanation

According to ILO The essential nature of multinational enterprises lies in the fact that its managerial headquarters are in one country referred to as home country while the enterprise carries out operations in a number of other countries as well (host countries)

The Benefits of MNC to the Host Country Are

  • MNCs help increase the investment level and thereby income and employment in host country.
  • The transnational corporations have become vehicles of or the transfer technology, especially to the developing countries.
  • They also kindle a managerial revolution in the host countries through professional management and the employment of highly sophisticated management techniques.
  • The MNCs enable the host countries to increase their exports and decrease their imports requirements.
  • They work to equalize the cost of factors of production around the world.

Question 19 (3 of 5 Based on Passage)

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Short Answer▾

What is the code of conduct to guide and regulate MNCs?

Explanation

The Principal Element of an International Regime for Investment Should Include

  • A framework to allow developing countries as well as transnational corporations to benefit from direct investments on terms contractually agreed upon. Home countries should not restrict investment or the transfers of technology abroad and should desist from other restrictive practices such as exports control.
  • Legislation promoted and coordinated in home and host countries, to regulate the activities of transnational corporations in such manner as ethical behavior, disclosure if information, restrictive business practices, cartels, anti- competitive practices, and labor standards.
  • Cooperation by the government in their tax policies to monitor transfer pricing and to eliminate the resort to tax havens.
  • Fiscal and other incentives and policies towards foreign investment to be harmonized among host developing countries, particularly at regional and sub regional levels to avoid the undermining of tax base and competitive position if host country.
  • An international procedure for discussions and consultations on measures affecting direct investment and the activities of transnational corporations.

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