Question

What term describes cross-border investment in which an investor resident in one economy establishes a lasting interest in and a significant degree of influence over an enterprise resident in another economy?

a) Import-export financing
b) Foreign direct investment (FDI)
c) Offshore investment
d) Global portfolio investment

Answer 1

Foreign Direct Investment (FDI) refers to an international investment in which an investor buys at least ten percent of a company or starts a business in a foreign country to have a lasting influence over it.

Step-by-step explanation:

The term that describes cross-border investment where an investor establishes a significant influence over a foreign enterprise is known as Foreign Direct Investment (FDI). A practical example of FDI is when a company from one country purchases a significant portion (at least ten percent) of a firm or starts a new business in another country.

For instance, the acquisition of the U.S. beer-maker Anheuser-Busch by the Belgian company InBev for $52 billion is a case of FDI. InBev had to provide euros, the domestic currency, in exchange for U.S. dollars. This distinguishes FDI from portfolio investment, which typically involves investments less than ten percent of a company and tends to have a more short-term focus compared to the long-term commitment often associated with FDI.