Empirical Evidence Regarding the Effects of Currency Devaluation on the Balance

question 11

Multiple Choice

Empirical evidence regarding the effects of currency devaluation on the balance of trade indicates that

• A) complete exchange-rate pass-through generally occurs.
• B) partial exchange-rate pass-through generally occurs.
• C) currency devaluations always improve the trade balance in the short run.
• D) currency devaluations always worsen the trade balance in the long run.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated before the production process begins based on estimated costs and activity levels.

Job-Order Costing

An accounting method used to assign costs to specific products or jobs, typically utilized in custom or specialized production.

Direct Labor-Hours

A measure of the labor directly involved in the manufacturing or production process, calculated in hours.

Machine-Hours

A measure of production time, indicating how many hours machines were operated during a certain period, often used for allocating manufacturing overhead.