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Global aspects of investment and technology

Suggested answers

Review Exercise 1

1. In economics, the creation of capital goods is known as:
   3. investment
   
   
   
2. The purchase of shares or debentures in an Australian company by an overseas firm is an example of:
   4. Portfolio Investment
   
   
   
3. With the creation of a global market for videos Australian producers will:
   2. become more competitive
   
   
   
4. Transnational corporations are able to influence the global economy through their ability to:
   4. all of the above
   
   
   
5. A Multinational Corporation:
   4. has subsidiaries in a number of countries

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Review Exercise 2

1. 1997-1999 210 x 100 = 44%

   473 1

   1998-1999 299 x 100 = 30%

   982 1

   A decline of 14%, due to global events such as the Asian Economic Crisis.

2. This trend reflects the potential for higher returns in industrialised economies that resulted from the rapid growth in information and technology industries.

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Review Exercise 3

1. Some examples are: Mutsui & Company, Nike, Adidas, McDonalds, Pepsi Cola, Coca Cola, Rio Tinto Mining Corporation, Itochu Corporation, AXA Group, Volkswagon Group, Sony, Deutsche Bank.
   
   

3. d All or any of the following:

   Advantages:

   1. Increases the levels of economic growth and the standard of living
   2. Investment in exporting industries can improve international competitiveness
   3. FDI contributes to the level of national savings
   4. Development of domestic industries
   5. Transnational corporations have access to advanced technology and expertise.

   Disadvantages:

   1. Income/profit is transferred overseas
   2. Foreign ownership of domestic industries
   3. Transfer pricing polices
   4. Reduce domestic competition and increase industry concentration.

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Review Exercise 4

1. Increased levels of FDI in industries where China has a comparative advantage.
2. The number of people below the poverty line has decreased to 42 million.
3. Greenfield investment is been used to increase the productive capacity of the economy e.g. building new factories and development of manufacturing industries.

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Review Exercise 5

1. This type of investment occurs when overseas corporations purchase shares, debentures or invest in other securities in existing domestic corporations.
2. International corporations such as Deutsche Asset Management move funds all over the world based on low risks and high returns. At the time this article was written the level of interest rates and exchange rates were very favourable for investment of this type in Australian businesses.

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