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      Question

      In the question below, two statements (I) and (II) are

      given. These statements may be either independent causes or may be effects of independent causes or a common cause. One of these statements may be the effect of the other statement. Read both the statements and decide which of the following answer choices correctly depicts the relationship between these two statements. Statement I: Several major multinational corporations have announced plans to move their regional headquarters out of the city. Statement II: The state government recently passed a law significantly increasing the corporate tax rate and labor compliance costs.
      A Statement I is the cause and statement II is its effect Correct Answer Incorrect Answer
      B Statement II is the cause and statement I is its effect Correct Answer Incorrect Answer
      C Both the statements I and II are independent causes Correct Answer Incorrect Answer
      D Both the statements I and II are effects of independent causes Correct Answer Incorrect Answer
      E Both the statements I and II are effects of some common cause Correct Answer Incorrect Answer

      Solution

      Analyze Statement II: This statement describes a change in policy—specifically, an increase in the financial burden on businesses (tax and compliance costs). This acts as the cause. Analyze Statement I: This statement describes the reaction of the corporations—leaving the city. This is a direct effect of the increased costs mentioned in the first statement. Relationship: Corporations usually move their headquarters to remain profitable. Since the government increased the cost of doing business (Statement II), the corporations decided to leave (Statement I). Therefore, Statement II is the cause and Statement I is its effect.

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