Suppose the United States Is Experiencing a Balance of Payments

question 62

Multiple Choice

Suppose the United States is experiencing a balance of payments deficit. To prevent the exchange rate from depreciating, the U.S. Treasury must

• A) sell foreign currency and buy dollars.
• B) sell dollars and buy foreign currency.
• C) sell both dollars and foreign currency.
• D) buy both dollars and foreign currency.

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Definitions:

Transportation-In

Costs incurred for shipping materials to a company, typically considered part of the inventory cost when calculating the cost of goods sold.

Net Method

An accounting practice where purchase discounts for early payment are anticipated and recorded, reducing the cost of purchased goods.

Perpetual Inventory System

An inventory management approach that keeps continuous, real-time records of goods purchased and sold, reflecting current inventory levels at all times.

Merchandise Inventory

Goods that a company holds for the purpose of selling them to customers, representing one of the key assets on the balance sheet.