A Key Assumption Behind the Explanation of Exchange Rate Determination

question 51

Multiple Choice

A key assumption behind the explanation of exchange rate determination in the short run is

• A)trade barriers are unimportant in the short run.
• B)changes in price levels are unimportant in the short run.
• C)exchange rates represent prices of financial assets in one currency relative to prices of similar financial assets in another currency.
• D)trade barriers and changes in price levels are unimportant in the short run.

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Definitions:

Master Budget

A comprehensive financial plan that includes all of the smaller budgets within a company, projecting all of its financial activities for a fiscal year.

Interdependent Budgets

Budgets that are connected and rely on figures from each other, illustrating the financial and operational relationships within an organization.

Production Budget

A detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory needs.

Direct Materials Budget

A detailed plan showing the amount of raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.