The Firm May Not Be Subject to High Degrees of Operating

question 56

Multiple Choice

The firm may not be subject to high degrees of operating exposure

• A)when changes in real exchange rates are exactly offset by the inflation differential.
• B)when changes in nominal exchange rates are exactly matched by the inflation differential.
• C)when changes in nominal exchange rates are exactly offset by the inflation differential.
• D)none of the options

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Definitions:

Equilibrium Price

is the price at which the quantity of goods supplied is equal to the quantity of goods demanded.

Exports and Imports

The totality of goods and services sent out to other countries (exports) and brought into a country (imports) from abroad.

NAFTA

The North American Free Trade Agreement, a treaty between Canada, Mexico, and the United States to reduce trade barriers and promote economic cooperation.

Free-Trade Area

A region where member countries agree to eliminate tariffs and other barriers to trade in goods and services amongst themselves.