Which One of the Following Statements Is True

question 55

Multiple Choice

Which one of the following statements is true?

• A) By devaluing its currency, that is, by lowering the domestic currency price of foreign currency, a country can insulate itself completely from an inflationary increase in foreign prices.
• B) By revaluing its currency, that is, by increasing the domestic currency price of foreign currency, a country can insulate itself completely from an inflationary increase in foreign prices.
• C) By revaluing its currency, that is, by lowering the domestic currency price of foreign currency, a country cannot insulate itself completely from an inflationary increase in foreign prices.
• D) By revaluing its currency, that is, by lowering the domestic currency price of foreign currency, a country can insulate itself completely from an inflationary increase in foreign prices.
• E) By revaluing its currency, that is, by lowering the domestic currency price of foreign currency, a country cannot insulate itself completely from a harmful decrease in foreign prices.

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Definitions:

Market Price Approach

The market price approach is a method used to value assets based on the current market price of similar or identical assets.

Transfer Price

The price at which goods and services are transferred between departments or subsidiaries of the same company.

Cost Price Approach

A pricing methodology where the selling price of a product is determined by adding a markup to its total cost of production or acquisition.

Return on Investment

A financial metric used to evaluate the efficiency or profitability of an investment, calculated by dividing the benefit (return) of an investment by the cost of the investment.