'Purchasing Power Parity' Is the Theory That in the Long

question 109

Multiple Choice

'Purchasing power parity' is the theory that in the long run, exchange rates move to equalise:

• A)nominal interest rates across countries.
• B)real GDP across countries.
• C)corporate profits across countries.
• D)the relative purchasing power of currencies across countries.

---

Definitions:

Variable Costing

An accounting method that charges only variable costs to cost of goods sold and reports fixed costs separately as period costs.

Fixed Manufacturing Overhead

Costs associated with production that do not vary with the level of output, such as salaries of managers and rent for factory buildings.

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed overhead—in the cost of a product.

Product Cost

Product cost refers to the total costs incurred to create a product, including direct labor, direct materials, and allocated overhead expenses, crucial for pricing and profitability analysis.