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Throughout the first decade of the 21st century, net increases in Indian direct investments in the Far East (funds outflows) exceeded net new Far East direct investment in India.Each of the following, if true, could help to account for this trend except:Land values in the Far East were increasing at a faster rate than in India.Labor mobility was higher in India than in the Far East.The cost of labor (wages) was consistently lower in the Far East than in India.Corporate liquidity was lower in India than in the Far East.

Question

Throughout the first decade of the 21st century, net increases in Indian direct investments in the Far East (funds outflows) exceeded net new Far East direct investment in India.Each of the following, if true, could help to account for this trend except:Land values in the Far East were increasing at a faster rate than in India.Labor mobility was higher in India than in the Far East.The cost of labor (wages) was consistently lower in the Far East than in India.Corporate liquidity was lower in India than in the Far East.

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Solution

The statement that could not account for the trend of net increases in Indian direct investments in the Far East exceeding net new Far East direct investment in India is: "Labor mobility was higher in India than in the Far East."

Here's why:

  1. "Land values in the Far East were increasing at a faster rate than in India." This could encourage Indian investors to invest in the Far East to benefit from the increasing land values.

  2. "The cost of labor (wages) was consistently lower in the Far East than in India." This could make the Far East more attractive for Indian companies looking to reduce production costs, leading to more direct investment in the region.

  3. "Corporate liquidity was lower in India than in the Far East." This could mean that Indian companies had less cash on hand, making it more difficult for them to invest domestically. As a result, they might have looked to the Far East for investment opportunities.

  4. "Labor mobility was higher in India than in the Far East." This statement does not help to account for the trend. Higher labor mobility in India would make it easier for companies to find and hire workers, potentially encouraging more domestic investment. This could lead to a decrease in Indian investments in the Far East, which is the opposite of the trend described.

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