In the short-run (specific-factors) model, an FDI inflow into a country's manufacturing sector will cause:
A) an increase in the output of the agricultural sector.
B) an increase in employment in the agricultural sector.
C) a decrease in employment in the manufacturing sector.
D) an increase in the output of and employment in the manufacturing sector.

Question

Quizplus · Accepted Answer

In the short-run (specific-factors) model, an FDI inflow into a country's manufacturing sector will cause an increase in the output of and employment in the manufacturing sector. This is because FDI inflows increase the capital and technology available in the manufacturing sector, leading to an increase in productivity and output. As a result, employment in the manufacturing sector also increases. There is no direct impact or relationship between FDI inflows in manufacturing and the agricultural sector.

In the Short-Run (Specific-Factors) Model, an FDI Inflow into a Country's