In Which of These Instances Does Price Function as a Signal

question 95

Multiple Choice

In which of these instances does price function as a signal in the market?

• A) Suppliers invest more in exploration when the price of oil increases.
• B) Consumers complain of price gouging as the price of oil skyrockets.
• C) Government imposes price controls on the skyrocketing price of oil.
• D) All of the answers are correct.

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Definitions:

Current-Rate Method

An accounting method used to convert the financial statements of a foreign subsidiary into the parent company’s reporting currency by applying the current exchange rate.

Temporal Method

An exchange rate conversion technique where monetary assets and liabilities are converted at historical rates, while non-monetary assets and liabilities are converted at the current rate.

Historical Rate

refers to the exchange rates used to convert foreign currency transactions or balances to the reporting currency based on the rates in effect at the dates of the transactions or balance sheet dates.

Non-Monetary Assets

Assets that are not held in the form of cash or cash equivalents, such as property, equipment, and intangible assets.