Suppose in a Financial Crisis, Major Automakers Reduce Their Production

question 156

Multiple Choice

Suppose in a financial crisis, major automakers reduce their production of autos while consumers reduce their demand for autos. We can conclude with certainty that in the market of autos,

• A)both the equilibrium price and equilibrium quantity will increase.
• B)the equilibrium price will decrease and the equilibrium quantity will increase.
• C)the equilibrium price will decrease, but the equilibrium quantity will increase, decrease or remain unchanged.
• D)the equilibrium quantity will decrease, but the equilibrium price will increase, decrease or remain unchanged.
• E)both the equilibrium price and equilibrium quantity will decrease.

Comprehend the concept of forward exchange rates.

Understand interest rate parity (IRP) and its applications in financial markets.

Develop insights into the methodology of analyzing net present value (NPV) of projects with cash flows in foreign currencies.

Understand the ethical considerations in conducting research, including consent, deception, and privacy issues.

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Definitions:

Responsibility Centers

Divisions or units within an organization for which managers are accountable for certain activities or financial outcomes.

Management by Exception

A management strategy where only significant deviations from expected outcomes are addressed, focusing leaders' attention on the most important issues.

Responsibility Accounting

An accounting system that measures the results of each responsibility center and compares those results with some measure of expected or budgeted outcome.

Responsibility Reporting System

The preparation of reports for each level of responsibility in the company’s organization chart.