A US Company Buys Merchandise from a Foreign Company Denominated in in the Foreign

question 12

Multiple Choice

A U.S. company buys merchandise from a foreign company denominated in the foreign currency. Which of the following statements is true?

• A) If the foreign currency appreciates, a foreign exchange gain will result.
• B) If the foreign currency depreciates, a foreign exchange loss will result.
• C) No foreign exchange gain or loss will result.
• D) If the foreign currency appreciates, a foreign exchange loss will result.
• E) Any gain or loss will be included in comprehensive income.

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Definitions:

Surface Waves

Seismic waves that travel on Earth’s surface.

Subduction Zone

A region of the Earth's crust where one tectonic plate moves under another, often leading to volcanic activity and earthquakes.

Continental Crust

The thick, buoyant part of the earth's crust that forms the continents and continental shelves, distinguished from the denser oceanic crust.

Continental Collision

A geological process where two continental plates collide, leading to the formation of mountains and other geological structures.