Question 18 - Teachoo Sample Paper - Social Science Class 10 - Paper 1 - Solutions to CBSE Sample Paper - Social Science Class 10 - Social Science Class 10

‘A foreign direct investment (FDI) is an investment made by a foreign entity in the equity of a domestic company’.

Accordingly, which of the following countries has the BEST potential for attracting FDI?

1. Country A has a stable and democratic government that offers incentives and protection to foreign investors.

2. Country B has a volatile and corrupt government that imposes high taxes and restrictions on foreign investors.

3.  Country C has a weak and dependent government that faces external threats and pressures from foreign powers.

4. Country D has a strong and nationalist government that discourages foreign involvement and promotes domestic industries.

Answer:

Answer by student

So, the correct answer is (A): Country A has a stable and democratic government that offers incentives and protection to foreign investors.

Detailed explanation by Teachoo

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Let’s check all the options

• Option (A) Country A has a stable and democratic government that offers incentives and protection to foreign investors - This is the best potential for attracting FDI, as it shows that the country has a favourable political and legal environment for foreign investors. It also shows that the country provides benefits and security to foreign investors, such as tax breaks, subsidies, guarantees, etc. So, this is correct .

• Option (B) Country B has a volatile and corrupt government that imposes high taxes and restrictions on foreign investors - This is the worst potential for attracting FDI, as it shows that the country has an unfavourable political and legal environment for foreign investors. It also shows that the country imposes costs and risks on foreign investors, such as high taxes, tariffs, quotas, regulations, etc. So, this is incorrect .

• Option (C) Country C has a weak and dependent government that faces external threats and pressures from foreign powers - This is also a poor potential for attracting FDI, as it shows that the country has an unstable and insecure environment for foreign investors. It also shows that the country faces challenges and uncertainties from external factors, such as wars, sanctions, interventions, etc. So, this is incorrect .

• Option (D) Country D has a strong and nationalist government that discourages foreign involvement and promotes domestic industries - This is also a low potential for attracting FDI, as it shows that the country has a hostile and protective environment for foreign investors. It also shows that the country follows policies and measures that discourage foreign involvement and promote domestic industries, such as import substitution, export promotion, etc. So, this is incorrect .

Thus, option (A) is correct .

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