(4.4)

Question 1

What are impact of MNCs on the local economy?

Answer 1

Advantages

• Offer good stable employment, prospects (advantages) for promotion and training
• Local labour, wages, working conditions and job creation
• can cause a multiplayer effect
• Local community can learn new skills
• Local businesses tend to operate in the surrounding area
• Improve local infrastructure

Disadvantages

• Risk to the local environment
• Could be exploiting local areas by paying them less
• May not hire locally and bring foreign workers
• May cause a decline of sales for domestic businesses

Question 2

What are the impact of MNCs on the national economy?

Answer 2

FDI Flow - increased income, tax, employment, reduce national debt
Balance of Payments - 
Technology and Skills Transfer - 
Consumers - 
Business Culture - 
Tax Revenues and Transfer Pricing -

Advantages:
• FDI increases : Improves economy’s balance of payments
• Raises value of human capital : High skilled workforce
• Increases government tax revenue : More incentives available for existing
businesses

Disadvantages:
• Environmental impact: Depletion of natural resources creates sustainability issues:.
Bad PR for country
• MC profits often repatriated (go back to home country)
• MNCs may dictate economic policy and negotiate lower tax rates due to power and
value to country

Question 3

What are the 4 factors to consider when controlling MNCs? (Need to be finished)

Answer 3

Political Influence - government can make laws to make it difficult for MNCs
Legal Control -
Taxation Policy - countries can increase taxes to deter MNCs
Pressure Groups -
Social Media - can add pressure??

Question 4

What is comparative advantage?

Answer 4

When a country is more efficient at producing one type of good than another type of good