Wednesday

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 9 The Real Economy in the Long Run
Chapter 25 of 36 Production and Growth
Section 12 of 23
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Things a country’s government can promote and strengthen to increase productivity and living standards include:
1· saving and investment
2· investment from abroad
3· education
4· health and nutrition
5· property rights and political stability
6· free trade
7· research and development
8· population growth
…
2· Investment from abroad
Another way long-term economic growth is attained is through investment by foreigners.
Two examples:
-1- Ford invests in its operations in Mexico
Ford uses the money to build a new factory in Mexico.
This case is called foreign direct investment.
When foreigners invest in a country they do so because they expect to earn an investment return in the form of profits.
-2- An American investor buys stock in a Mexican corporation
The Mexican corporation uses the money along with its own to build a new factory in Mexico.
This investment by the American is called foreign portfolio investment.
When an American buys stock in a Mexican corporation he/she expects to earn an investment return in the form of dividends.
These investments by USA owners and investors increase Mexico's
amount of physical and human capital leading to increased and better employment and a larger GDP.
…
a new factory in Mexico
Mekishiko ni shin koujou