Question

1. List and explain the potential benefits of foreign direct investment in developing countries.

2. Why is the use of complex macroeconomic planning models in developing countries limited?

Answer 1

Question 1

Potential benefits of foreign direct investment in developing countries are:

1. Increase in productivity-

When a company invests in other country and say open a new office, it will lead to increase in production and with more employment and forces coming on board, it will result in efficiency.

2. Cheaper labor-

Investing in developing countries helps you get cheaper labor because in such countries, the employment opportunities are low. So, the people takes the job that offers them any amount of money. This was the company is able to save costs and increase revenue.

3. Economic development-

Will all factors contributing, ultimately this contributes in the development of country by increasing GDP.

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