Question

Direct effects arise when a foreign mne employs a number of host-country citizens.

Answer 1

that statement is true.

direct effects in this context refers to whether a multinational enterprise (MNE) would accept a direct host-country benefits from the nations where they operates.
If the Enterprise decided to employ the workers from that nation, it would help the nation increase its GDP and reduce unemployment, and the nation would create some sort of tariff reduction for the enterprise in return