How Does a Decrease in Value of a Country's Currency

question 181

Multiple Choice

How does a decrease in value of a country's currency relative to other currencies affect its balance of trade?

• A)A decrease in value of a country's currency relative to other currencies raises imports, reduces exports, and reduces the balance of trade.
• B)A decrease in value of a country's currency relative to other currencies reduces imports, raises exports, and reduces the balance of trade.
• C)A decrease in value of a country's currency relative to other currencies reduces imports, raises exports, and increases the balance of trade.
• D)A decrease in value of a country's currency relative to other currencies raises imports, reduces exports, and increases the balance of trade.
• E)A decrease in value of a country's currency relative to other currencies reduces imports, reduces exports, and reduces the balance of trade.

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Definitions:

Aging of Receivables

The process of categorizing accounts receivable by their due dates to estimate bad debt expenses.

Allowance Account

An account used to offset the total amount of accounts receivable due to the likelihood that some accounts will not be collected.

Bad Debts Expense

An expense account that represents the cost of credit sales that are considered to be uncollectible, reducing net income on the income statement.