Suppose There Are Two Countries That Are Identical in Every

question 32

Multiple Choice

Suppose there are two countries that are identical in every way with the following exception. Country A is pursuing a fixed exchange rate regime and country B is pursuing a flexible exchange rate regime. Suppose taxes are increased in both countries and rise by the same amount. Given this information, we know that:

• A) the change in output in A will be greater than in B.
• B) the relative output effects are ambiguous.
• C) the relative output effects depend on relative prices.
• D) the change in output will be the same in both countries.
• E) the change in output in B will be greater than in A.

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Definitions:

Departmental Overhead Rates

Specific rates used to allocate overhead costs to different departments within a company based on varying criteria.

Machine Hours

represent a measure of the amount of time a machine is in operation, used in costing to allocate expenses based on the use of machinery.

Departmental Overhead Rate

A method to allocate overhead costs to specific departments based on certain criteria, such as machine hours or labor costs.

Direct Labor Hours

The total hours worked by employees directly involved in producing goods or services.