When Setting Transfer Prices Among International Subsidiaries, the Corporation Must

question 15

Multiple Choice

When setting transfer prices among international subsidiaries, the corporation must:

• A) make sure that the total tax is minimized.
• B) ensure that the transfer prices are acceptable to the taxing authorities in the countries involved.
• C) do whatever it takes to make taxes paid in the United States as low as possible.
• D) follow the transfer pricing policy used for domestic transfers.

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Definitions:

Standard Deviation

In finance, standard deviation measures the amount of variance or dispersion of a set of financial returns, indicating the investment's volatility.

Expansionary Fiscal Policy

An increase in government purchases, decrease in net taxes, or some combination of the two aimed at increasing aggregate demand enough to reduce unemployment and return the economy to its potential output; fiscal policy used to close a recessionary gap

Contractionary Fiscal Policy

A decrease in government purchases, increase in net taxes, or some combination of the two aimed at reducing aggregate demand enough to return the economy to potential output without worsening inflation; fiscal policy used to close an expansionary gap.

Contractionary Monetary Policy

A monetary policy strategy used by central banks to reduce inflation and cool an overheating economy by raising interest rates and decreasing the money supply.