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Why should a government be concerned with the pricing of products that a company transfers to an affiliate in another country? Please explain in terms of taxation and exchange rates. Solution The government should be concerned with the pricing of the products which are transferred to affiliate companyin order to control the price index of the balance of payments. This is because failure to control the manufacturers will find for the better way to avoid paying the taxes and the tariffs as this can affect the countries value of the domestic product. the government can also control the prices to avoid inflation as when the manufacturers are given chance to price their products the prices can be high or very low to an extent that they will increase the countries exchange value which can lead to inflation and also the imports may be very high than the exports and this end up affecting the country .

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