The correct answer is: D. FDI creates harmonious political relations.
FDI can have a positive or negative impact on political relations between countries. On the one hand, FDI can increase economic interdependence between countries, which can lead to greater cooperation and understanding. On the other hand, FDI can also lead to increased competition between countries, which can strain political relations.
There is no clear evidence that FDI always leads to harmonious political relations. In some cases, FDI can actually lead to increased tensions between countries. For example, if a country invests heavily in another country, it may become more dependent on that country for its economic well-being. This can lead to resentment and conflict if the relationship between the two countries sours.
Overall, the impact of FDI on political relations is complex and depends on a variety of factors. There is no clear evidence that FDI always leads to harmonious political relations.
Here is a brief explanation of each option:
A. Only one market can better be served with differentiated products.
This statement is correct. FDI can help companies to better serve a particular market by allowing them to produce products that are tailored to the needs of that market. For example, a company that produces cars may decide to set up a factory in a country where there is a high demand for small, fuel-efficient cars. This would allow the company to better serve the needs of that market and increase its sales.
B. FDI overcomes tariff and transport cost involved in trade.
This statement is correct. FDI can help companies to overcome the tariff and transport costs involved in trade by allowing them to produce goods in the country where they are sold. This can lead to lower costs for consumers and increased sales for companies.
C. FDI reduces financial risk through greater diversification.
This statement is correct. FDI can help companies to reduce financial risk by allowing them to diversify their operations into different countries. This can help to protect companies from economic downturns in any one country.
D. FDI creates harmonious political relations.
This statement is incorrect. FDI can have a positive or negative impact on political relations between countries. On the one hand, FDI can increase economic interdependence between countries, which can lead to greater cooperation and understanding. On the other hand, FDI can also lead to increased competition between countries, which can strain political relations.