An MNE Has a Contract for a Relatively Predictable Long-Term

question 26

Multiple Choice

An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by paying for imports from Canada in Japanese yen. This hedging strategy is known as:

• A) a natural hedge.
• B) currency-switching.
• C) matching.
• D) diversification.

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Definitions:

GDP

Gross Domestic Product, the total market value of all final goods and services produced within a country in a specific time period.

Natural Rate

The natural rate typically signifies the unemployment rate that maintains a steady inflation rate over time, also known as the natural rate of unemployment.

Short-run Ups

Temporary or brief increases in economic indicators or market performance.

Standard of Living

The level of wealth, comfort, material goods, and necessities available to a person, group, or nation.