How Would Aggregate Demand Change If Foreign Incomes Increase and the Exchange

question 27

Multiple Choice

How would aggregate demand change if foreign incomes increase and the exchange rate value of the dollar increases?

• A) Neither change would affect aggregate demand.
• B) The increase in income would decrease aggregate demand; the increase in the exchange rate would increase aggregate demand.
• C) The increase in income would increase aggregate demand; the increase in the exchange rate would decrease aggregate demand.
• D) Both changes would decrease aggregate demand.

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Definitions:

Raw Materials

Raw materials are the basic, unprocessed inputs used in the manufacturing of goods, including items like minerals, chemicals, or agricultural products essential for production processes.

Factory Overhead Applied

The allocation of all indirect costs of manufacturing to the actual production, aiding in the determination of the total cost of production.

Predetermined Factory Overhead Rate

The rate used to apply factory overhead costs to the goods manufactured. The rate is determined by dividing the budgeted overhead cost by the estimated activity usage at the beginning of the fiscal period.

Activity Base

A measure used in costing, representing a unit of activity that triggers costs, helping to allocate costs more accurately.