​A Weak Home Currency May Not Be a Perfect Solution

question 18

Multiple Choice

​A weak home currency may not be a perfect solution to correct a balance-of-trade deficit because:

• A) ​it reduces the prices of imports paid by local companies.
• B) ​it increases the prices of exports by local companies.
• C) ​it prevents international trade transactions from being prearranged.
• D) ​foreign companies may reduce the prices of their products to stay competitive.

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Definitions:

Revenue

The total amount of money received by a company from its business activities, such as selling goods or services, before any expenses are subtracted.

Debit Balance

Refers to the balance remaining in a financial account where debts or expenses exceed the credits or revenues.

Footing

Footing is the process of summing up the numerical values in an accounting column to determine the total, typically as a preliminary step in the preparation of financial statements.

Normal Debit Balance

The expected balance type of an account that is increased by a debit, typical for assets, expenses, and losses.