Question

Chris owns and operates a restaurant in Denver, Colorado (USA). He would like to own a second restaurant. While visiting Mexico, Chris purchases an existing restaurant owned by a Mexican citizen just north of Mexico City. This new restaurant is now generating more sales for Chris than his Denver restaurant is generating.

Based solely on this information, Chris engaged in which of the following by acquiring this second restaurant?

a.Cultural literacy
b.Free trade
c.International trade
d.Foreign portfolio investment
e.Foreign direct investment

Answer 1

Chris has engaged in foreign direct investment by acquiring a restaurant in Mexico, which involves a lasting interest and influence in a foreign business.

Step-by-step explanation:

Based on the information given, Chris engaged in foreign direct investment (FDI) by acquiring a second restaurant in Mexico. FDI occurs when an investor from one country acquires a lasting interest and a degree of influence in the management of a business in another country by purchasing at least ten percent of the firm or starting up a new enterprise. As Chris is from the United States and purchased an existing restaurant just north of Mexico City, he is now involved in international business and investment because he owns and operates a business in a foreign country.