Melon Computer Company Manufacturers Its Computer Components in Singapore and Assembles

question 102

Multiple Choice

Melon Computer Company manufacturers its computer components in Singapore and assembles the computers intended for sale in North America in its plant in Arizona. If the U.S. reduces the corporate income tax rate next year, what is the likely outcome for Melon Computer Company?

• A) Reduce the transfer price for computer components and increase downstream profits
• B) Reduce the transfer price for computer components and decrease downstream profits
• C) Increase the transfer price for computer components and increase downstream profits
• D) Increase the transfer price for computer components and decrease downstream profits

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Definitions:

Expansionary Monetary Policy

A central bank policy aimed at increasing the money supply to stimulate economic growth by lowering interest rates and increasing liquidity.

Economic Growth

An increase in the production of goods and services in an economy over a period of time, indicating improvement in living standards.

Technological Innovations

The implementation of new technologies or the novel application of existing technologies to create new products, processes, or services.

Smoot-Hawley

Refers to the Smoot-Hawley Tariff Act of 1930, a legislation passed in the United States that imposed high tariffs on imported goods to protect American businesses and farmers, which is widely considered to have exacerbated the Great Depression.