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IAI Actuarial Core Principles · Business Economics · Globalisation and multinational business

Which statement about the role of multinational corporations (MNCs) and capital market liberalisation as drivers of globalisation is most accurate?

Free capital movement lets firms raise finance and invest abroad, while MNCs spread production, technology and management across countries by locating activities where costs and markets are favourable. Together they deepen integration, so globalisation is driven by both capital flows and firms' location decisions.

  1. AMNCs reduce globalisation because they confine production to one country
  2. BFree capital movement raises globalisation by letting firms raise finance and invest abroad, while MNCs spread production and technology across countriesCorrect
  3. CCapital market liberalisation prevents portfolio investment but encourages trade in goods
  4. DMNCs are driven only by home-country government instructions
  5. Globalisation is driven by capital flows but never by the location decisions of firms

Explanation

MNCs locate production, R&D and services where costs and markets suit them, transferring technology and linking economies. Capital market liberalisation allows funds to flow across borders, supporting such investment. The other statements contradict this.

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