How Is the Adverse Effect of the Balance of Payments

question 73

Multiple Choice

How is the adverse effect of the balance of payments for the home country due to an FDI usually offset?

• A) By increased imports to the home country as a result of the FDI
• B) By the subsequent inflow of foreign earnings
• C) By substituting direct exports made earlier from the home country
• D) By further investments usually made to expand foreign operations

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Definitions:

Activity Level

In cost accounting, this refers to the volume of production or operations, impacting variable costs and potentially influencing budgeting and performance measures.

Contribution Margin

The contribution margin is the difference between sales revenue and variable costs, showing how much revenue contributes to fixed costs and profit.

Variable Costs

Expenditures that fluctuate based on the production levels or the number of sales.

Break-Even Point

The point at which total costs and total revenue are equal, meaning there is no net loss or gain.