When a US Company Purchases Parts from a Foreign Company, Which of Which

question 10

Multiple Choice

When a U.S. company purchases parts from a foreign company, which of the following will result in zero foreign exchange gain or loss?

• A) The transaction is denominated in U.S. dollars.
• B) The option strike price to sell foreign currency is less than the spot rate of the currency.
• C) The option strike price to buy foreign currency is less than the spot rate of the currency.
• D) The foreign currency appreciated in value relative to the U.S. dollar.
• E) The foreign currency depreciated in value relative to the U.S. dollar.

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Definitions:

Long-Run Aggregate Supply Curve

A graphical representation showing the relationship between the price level and the quantity of output that an economy can produce when all resources are fully employed, assuming no changes in technology or resource availability.

Classical Model

An economic theory that suggests markets function best with minimal government intervention and that supply and demand are the primary forces driving the economy.

Self-Regulating Market

A market mechanism in which market forces such as supply and demand are allowed to operate freely without external intervention, theoretically leading to efficient outcomes.

Say's Law

An economic theory that proposes supply creates its own demand, meaning production inherently creates the consumption of equivalent value.