Which of the following is a potential benefit of FDI?

Which of the following is a potential benefit of FDI?

• A. Creates jobs, transfers technology, and boosts growth.
• B. Always leads to higher tariffs.
• C. Reduces capital inflows.
• D. Only benefits the donor country.

Answer: (A)

FDI brings capital into the host country and often comes with new jobs, technology, and know-how. When a foreign firm invests, it hires local workers, trains them, and introduces advanced processes and equipment. This boosts productivity, helps local suppliers develop, and can drive broader economic growth through spillover effects. That combination—creating jobs, transferring technology, and boosting growth—is why this option best describes a potential benefit of FDI. It isn’t about higher tariffs (tariffs are trade policy, not a direct outcome of investment); FDI is a capital inflow, not something that reduces inflows; and benefits aren’t limited to the donor country—the host country can gain just as much from the investment.

FDI brings capital into the host country and often comes with new jobs, technology, and know-how. When a foreign firm invests, it hires local workers, trains them, and introduces advanced processes and equipment. This boosts productivity, helps local suppliers develop, and can drive broader economic growth through spillover effects. That combination—creating jobs, transferring technology, and boosting growth—is why this option best describes a potential benefit of FDI. It isn’t about higher tariffs (tariffs are trade policy, not a direct outcome of investment); FDI is a capital inflow, not something that reduces inflows; and benefits aren’t limited to the donor country—the host country can gain just as much from the investment.