Question

Suppose an American buys stock issued by an Argentinian corporation. The Argentinian firm uses the proceeds from the sale to build a new office complex. This is an example of foreign______ investment in Argentina.
Which of the following policies are consistent with the goal of increasing productivity and growth in developing countries? Check all that apply.

a. Impose restrictions on foreign ownership of domestic capital.
b. Provide tax breaks and patents for the firms that pursue research and development in health and sciences.
c. Protect property rights and enforce contracts.
d. Increase taxes on the incomes from savings.

Answer 1

Suppose an American buys stock issued by an Argentinian corporation. The Argentinian firm uses the proceeds from the sale to build a new office complex. This is an example of foreign portfolio investment in Argentina.

The following are the policies that are consistent with the goal of increasing productivity and growth in developing countries:

b. Providing tax breaks and patents for firms that pursue research and development in health and sciences.

c. Protecting property rights and enforce contracts.

Explanation:

A foreign portfolio investment is the investment made by a foreigner in the form of purchase in country’s stock and bond markets or deposit of money in bank.

Foreign portfolio investment is important because it gives high risk-adjustment return to the investors. The investors get the opportunity to engage in international diversification of portfolio assets.

The growth of the developing countries can be increased by enforcing contracts and providing patents for the firms that deal with research and development in health and sciences.