For team 1
How can a country with strong investment potential still fail to attract investors?
A country may have natural resources, a large market, or advanced technology, but without stable laws, low corruption, and political stability, investors perceive high risk. High potential without safe conditions discourages investment.
How do brokers and financial intermediaries influence economic growth indirectly?
They connect investors with companies, reduce transaction costs, provide market transparency, and increase trust. Efficient intermediaries increase capital flow, while weak ones reduce investor confidence and slow economic growth
Why is political stability often more important than tax incentives?
Political stability ensures predictability and safety for long-term investments. Tax benefits lose value if sudden policy changes or instability threaten business operations or property rights.
How does weak corporate transparency reduce investor confidence?
When companies hide financial information or lack accountability, investors cannot assess risks accurately, leading them to withdraw or avoid investment despite economic growth.
How can investor risk perception create a self-fulfilling cycle?
High perceived risk causes investors to withdraw capital, reducing liquidity and economic activity. This weakens the economy further, confirming investor fears and worsening the investment climate.
Institutional quality vs natural resources — which matters more?
Strong institutions ensure legal protection, contract enforcement, and transparency. Natural resources create potential, but without institutions, they often fail to attract sustainable investment.
Why is a predictable legal system more valuable than short-term profits?
Predictable laws reduce uncertainty, allowing investors to plan long-term projects. Short-term profits are risky if laws or regulations can suddenly change.
How does corruption affect both conditions and potential?
Corruption increases costs and risks (worsening conditions) and reduces efficiency, innovation, and productivity (lowering potential).
During a global slowdown, which factor is most critical for investor retention?
Economic and political stability. In uncertain times, investors prioritize safety, predictability, and strong institutions over high returns.
Can infrastructure alone significantly increase investment?
No. Infrastructure improves potential, but without legal protection, low corruption, and stable policies, investors still face high risk.
How does inflation reduction improve investment conditions?
Lower inflation stabilizes prices, protects returns, reduces uncertainty, and improves long-term planning for investors.
Why do stable conditions without growth opportunities fail to attract investors?
Safety without profit opportunities limits returns. Investors seek both low risk and reasonable profit potential
Domestic vs foreign investors — how do they influence the climate differently?
Domestic investors signal confidence and stability, while foreign investors bring capital, technology, and global credibility.
What is the trade-off between tax reduction and strong institutions?
Lower taxes attract investors but reduce government revenue. Weak public funding can harm legal systems, infrastructure, and institutions if not managed carefully.
Why are property rights fundamental to investment?
Without guaranteed ownership, investors risk losing assets. Secure property rights ensure long-term confidence and capital commitment