Define Foreign Direct Investment (FDI) and name a potential benefit and risk.

• A. Short-term portfolio investment; benefits include quick profits; risks include currency risk.
• B. FDI is investment by a firm in one country into business interests in another; benefits include technology transfer and jobs; risks include potential loss of domestic control.
• C. FDI is government-to-government loans; benefits include debt relief.
• D. Domestic investment by government in sheltered sectors; benefits include national control.

Answer: (B)

Foreign Direct Investment is investment by a firm from one country into business interests in another country, typically involving a lasting stake and some control or significant influence over the foreign operation. A key benefit is technology transfer and the creation of local jobs, along with exposure to new markets and managerial know-how. A notable risk is potential loss of domestic control over the investment, plus exposure to political or regulatory changes and profit repatriation.

This matches the option that states FDI involves cross-border business investments and lists technology transfer and jobs as benefits, with loss of domestic control as a risk. Other descriptions describe short-term portfolio investments, government loans, or purely domestic government investment, which do not fit FDI.