Which Theory Attempted to Explain Why a Favorable Balance of Trade

question 93

Multiple Choice

Which theory attempted to explain why a favorable balance of trade could only exist in the short run, since it would automatically be eliminated in the long run?

• A) price-specie flow doctrine
• B) theory of absolute advantage
• C) theory of comparative advantage
• D) theory of fluctuating incomes

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Definitions:

Variable Costing

An accounting method that includes only variable production costs (materials, labor, and overhead) in product costs and treats fixed manufacturing overhead as an expense of the period.

Period Cost

Expenses that are not directly tied to production activity and are expensed in the period in which they are incurred.

Variable Costing

A technique in accounting that encompasses only costs that vary with production (including direct materials, direct labor, and variable manufacturing overhead) in the pricing of products.

Period Cost

Expenses that are not directly tied to the production of goods and are instead associated with time periods, such as administrative salaries.