In the long run, if all resources can move within a
Nation, an inflow of FDI will:
A)increase production in the capitalintensive sectors as capital becomes cheaper.
B)lower the productivity of the agricultural sector.
C)lower wages.
D)decrease the production of capitalintensive goods.

Question

In the long run, if all resources can move within a
Nation, an inflow of FDI will:
A)increase production in the capital­intensive sectors as capital becomes cheaper.
B)lower the productivity of the agricultural sector.
C)lower wages.
D)decrease the production of capital­intensive goods.

Quizplus · Accepted Answer

An inflow of FDI can lead to an increase in capital stock in the host country, which leads to a decrease in the cost of capital. As a result, the capital-intensive sectors can witness increased production due to the cost advantage.

In the Long Run, If All Resources Can Move Within