DP Economics
Question 19N.3.HL.TZ0.2k
| Date | November 2019 | Marks available | [Maximum mark: 2] | Reference code | 19N.3.HL.TZ0.2k |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Outline | Question number | k | Adapted from | N/A |
k.
[Maximum mark: 2]
19N.3.HL.TZ0.2k
The information in Table 2 refers to Country B, an economically less developed economy.
Table 2
(k)
The data in Table 2 suggest that Country B may have attracted significant foreign direct investment (FDI).
Outline one possible disadvantage of foreign direct investment (FDI) for economically less developed countries.
[2]
Markscheme
Award [1] for stating one possible disadvantage without any outline.
Award [2] for stating one possible disadvantage with a brief outline.
Disadvantages may include:
- Repatriation of profits and royalties may lead to balance of payments problems.
- Importation of intermediate goods and capital goods may lead to balance of payments problems.
- Domestic firms may be hurt as they may be small and not able to compete.
- Technology employed may be inappropriate so that employment decreases.
- Income inequality may widen between rural and urban areas where most MNCs locate.
- The tax contributions may be less than expected because of tax concessions and/or transfer pricing.
- MNCs may use their economic power to adversely influence markets/government policies.
- Production by MNCs may result in negative externalities/exploitation of resources.
Any other valid disadvantage outlined.
