Aid, trade, investment and multinational companies
Aid, trade, investment and multinational companies: build the core model, apply it to evidence and qualify conclusions where outcomes depend on context.
9708 section 11.5; A Level. Checked against Cambridge's 2026–2028 Version 2 (latest version published December 2025) and 2029 Version 1 (published September 2026). Cambridge states that neither version has significant changes affecting teaching. Always follow the syllabus for the candidate's examination year.
Before you begin
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What is one reason a host country may assess a multinational company’s local supplier links?
What you will learn
- Compare forms, reasons, effects and importance of international aid
- Analyse trade and investment relationships
- Evaluate multinational-company activities and consequences
Core model and terms
Aid can be humanitarian, technical, grant-based, concessional or tied to purchases; donors may respond to emergencies, strategic aims or development needs. Effects depend on timing, governance, local capacity, conditions and whether projects match priorities. Trade and investment can widen markets, provide capital and spread knowledge, but gains and costs differ across workers, firms and regions.
Apply and evaluate
A multinational company operates in more than one country and may invest, produce, source and sell across borders. It can create jobs, skills, tax revenue and technology links; it can also repatriate profits, exercise bargaining power, displace local firms or create environmental costs. Evaluate actual linkages, wages, tax arrangements, competition, labour standards and environmental rules instead of assuming every MNC benefits or harms a host country.
Pause and explain
Which statement best applies aid, trade, investment and multinational companies?
Worked example
An aid-funded irrigation project raises farm output, but its equipment must be bought from the donor country. Give one potential benefit, one concern and evidence needed to judge the project.
Show the worked solution
- Irrigation may raise productivity and resilience
- Tied procurement can increase cost or limit local choice
- Compare project outcomes, maintenance, local access, alternatives and the aid terms
Answer Irrigation may raise productivity and resilience → Tied procurement can increase cost or limit local choice → Compare project outcomes, maintenance, local access, alternatives and the aid terms
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
An aid-funded irrigation project raises farm output, but its equipment must be bought from the donor country. Give one potential benefit, one concern and evidence needed to judge the project.
Give me a hint
Consider output, aid conditions, local capacity and who receives the gain.
Compare my reasoning
- Irrigation may raise productivity and resilience
- Tied procurement can increase cost or limit local choice
- Compare project outcomes, maintenance, local access, alternatives and the aid terms
Irrigation may raise productivity and resilience Tied procurement can increase cost or limit local choice Compare project outcomes, maintenance, local access, alternatives and the aid terms
Look for these in your work
- Irrigation may raise productivity and resilience
- Tied procurement can increase cost or limit local choice
- Compare project outcomes, maintenance, local access, alternatives and the aid terms
A multinational trains local workers and buys from local suppliers. Explain one possible development benefit and one condition needed for it to persist.
Give me a hint
Trace a local skill or supplier linkage beyond the company’s own payroll.
Compare my reasoning
- Training can raise transferable skills and supplier orders can deepen local links
- Benefits may persist if workers and firms can use those capabilities after the contract or investment changes
- Check wages, competition and training access
Training can raise transferable skills and supplier orders can deepen local links Benefits may persist if workers and firms can use those capabilities after the contract or investment changes Check wages, competition and training access
Look for these in your work
- Training can raise transferable skills and supplier orders can deepen local links
- Benefits may persist if workers and firms can use those capabilities after the contract or investment changes
- Check wages, competition and training access
A foreign-owned factory exports most output but repatriates profits. Explain why FDI can raise productive capacity without all income staying in the host economy.
Give me a hint
Separate the location of production from the ownership of returns.
Compare my reasoning
- The factory adds local capital and output
- Foreign owners receive a share of profits
- Net national income and local spillovers depend on wages, taxes, supplier links and reinvestment
The factory adds local capital and output Foreign owners receive a share of profits Net national income and local spillovers depend on wages, taxes, supplier links and reinvestment
Look for these in your work
- The factory adds local capital and output
- Foreign owners receive a share of profits
- Net national income and local spillovers depend on wages, taxes, supplier links and reinvestment
Why should aid effectiveness be assessed by more than the amount committed?
Give me a hint
Compare announced resources with delivery, outcomes and who benefits.
Compare my reasoning
- Commitments may not be fully disbursed or maintained
- Projects can miss local priorities
- Measure access, outputs, long-run outcomes, costs and distribution
Commitments may not be fully disbursed or maintained Projects can miss local priorities Measure access, outputs, long-run outcomes, costs and distribution
Look for these in your work
- Commitments may not be fully disbursed or maintained
- Projects can miss local priorities
- Measure access, outputs, long-run outcomes, costs and distribution
Common mistakes
- Assuming aid, trade or multinational investment has the same effect in every country or treating output gains as proof that gains are evenly shared.
What can you explain now?
What is one reason a host country may assess a multinational company’s local supplier links?
Compare with the explanation
They show whether investment creates activity and capabilities beyond the firm itself
Supplier linkages can spread income, demand and knowledge into domestic firms.
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Make it stick
Before moving on, explain the central idea in aid, trade, investment and multinational companies and state one condition that could change its effect.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.