Question

Which of the following is NOT an example of political risk?

1) Government may impose taxes on a subsidiary.
2) Government may impose barriers on a subsidiary.
3) Consumers may boycott the MNC.
4) Consumers' income levels may decrease, thus decreasing consumption.

Answer 1

The correct answer is Option 4) - Consumers' income levels may decrease, thus decreasing consumption - is not an example of political risk, but rather an example of economic risk.

Step-by-step explanation:

The correct answer is 4) Consumers' income levels may decrease, thus decreasing consumption. This is not an example of political risk, but rather an example of economic risk.

Political risk refers to the potential for political actions, such as government regulations or consumer behaviors, to negatively impact the operations and profitability of a multinational corporation (MNC). The other options listed in the question are all examples of political risk.

For example, option 1) Government may impose taxes on a subsidiary is a political risk because it involves government action that can affect the financial performance of a subsidiary.

Option 2) Government may impose barriers on a subsidiary is also a political risk because it involves government actions that can hinder the subsidiary's operations and market access.

Option 3) Consumers may boycott the MNC is another example of political risk because it involves consumer behavior influenced by political factors.

In conclusion, all options except option 4) are examples of political risk.