1. An expansionary fiscal policy crowds out private investment.

2. The policy of investment tax credit lowers the tax liability of the firm but increases the cost of capital of the firm.

1. Real balance effect

2. Rate of interest effect

3. Foreign trade effect 

1. Demand for foreign goods increases.

2. Tax revenue for the government increases.

3. This may lead to a decrease in savings.

4. Stimulates the economy by increases in real GDP.

Statement-I: Transfer pricing refers to the prices of a vertically integrated multinational firm’s charges for its components or parts.

Statement II: Multinational companies inflate transfer prices for their components, show lower profit and pay less tax.

Which one of the following is correct in respect of the above statements?