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Definition Of Fdi

Economics notes

Definition Of Fdi

➡️ Foreign Direct Investment (FDI) is an investment made by a company or individual in one country into a business in another country.
➡️ FDI is typically made in the form of capital investments, such as the purchase of physical assets or the establishment of a joint venture with a local business.
➡️ FDI can bring new capital, technology, and jobs to the host country, and can help to stimulate economic growth and development.

What is FDI and how does it impact a country's economy?

FDI stands for Foreign Direct Investment, which refers to the investment made by a foreign company or individual in a domestic company or enterprise. FDI can have a significant impact on a country's economy by creating jobs, increasing productivity, and promoting economic growth. It can also bring in new technologies and expertise, which can help to improve the competitiveness of domestic firms.

What are the benefits and drawbacks of FDI for developing countries?

FDI can bring many benefits to developing countries, such as increased investment, job creation, and access to new technologies and markets. However, there are also potential drawbacks, such as the risk of exploitation by foreign investors, the potential for environmental damage, and the possibility of crowding out domestic firms. Developing countries need to carefully consider the potential benefits and drawbacks of FDI before deciding whether to encourage or restrict it.

How does FDI affect the balance of payments of a country?

FDI can have both positive and negative effects on the balance of payments of a country. On the one hand, FDI can bring in new capital and increase exports, which can improve the current account balance. On the other hand, FDI can also lead to increased imports of goods and services, which can worsen the current account balance. Additionally, FDI can also affect the capital account balance by increasing or decreasing the amount of foreign investment in a country. Overall, the impact of FDI on the balance of payments will depend on a variety of factors, including the nature of the investment and the economic conditions of the country.

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