IAI Actuarial Core Principles · Business Economics · Globalisation and multinational business
Which of the following is a recognised cost of globalisation for a developing economy such as India?
A recognised cost is that infant domestic industries may be unable to compete with established foreign producers and may close. Lower prices, technology transfer, FDI inflows and specialisation are commonly listed as benefits, not costs.
- AGreater choice and lower prices for consumers
- BTransfer of technology from multinational firms
- CDomestic infant industries may be unable to compete with established foreign producers and may closeCorrect
- DLarger inflows of foreign direct investment
- Increased specialisation according to comparative advantage
Explanation
Opening markets exposes young domestic industries to established foreign rivals with scale advantages, risking closure and job losses. The other options are benefits normally cited for globalisation.
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