The 'Base Erosion and Profit Shifting' concerns tax avoidance by: MCQ with Answer and Explanation

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The 'Base Erosion and Profit Shifting' concerns tax avoidance by:

A. multinational enterprises shifting profits to low-tax jurisdictions

B. government departments

C. non-profit organizations

D. individual employees

Answer: Option A

Solution (By JKSSB Mock Tests)

BEPS involves multinational enterprises shifting profits to low-tax jurisdictions.

This question belongs to: Economy GK Economy Set 1

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Question #1

Which of the following is a characteristic of a dualistic economy?

A. Only agricultural activities

B. Absence of informal sector

C. Coexistence of modern and traditional sectors

D. Uniform technology across sectors

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Correct Answer: Option C

Explanation:
Dualism refers to the coexistence of a modern, capital-intensive sector alongside a traditional, labour-intensive sector within the same economy.

This question belongs to: Economy GK Economy Set 1

Question #2

Which of the following is a feature of the 'Ricardian Equivalence Theorem'?

A. Government debt is always neutral regardless of agents’ behaviour

B. Tax cuts financed by debt increase private consumption

C. Tax cuts financed by debt do not affect private consumption because agents anticipate future tax liabilities

D. Only liquidity-constrained agents matter

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Correct Answer: Option C

Explanation:
Ricardian equivalence asserts that, under certain conditions, debt-financed tax cuts do not stimulate consumption because forward-looking agents save the tax cut to pay the future taxes needed to service the debt.

This question belongs to: Economy GK Economy Set 1

Question #3

The concept of 'Pass-Through' of exchange-rate changes refers to:

A. Only the effect on output

B. Only the effect on interest rates

C. The complete absence of price adjustment

D. The extent to which changes in the nominal exchange rate are reflected in domestic prices of traded goods

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Correct Answer: Option D

Explanation:
Exchange-rate pass-through measures the degree to which a change in the nominal exchange rate is transmitted to import prices and ultimately to consumer prices in the domestic economy.

This question belongs to: Economy GK Economy Set 1

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