How Must Currency Contracts Be Structured for a Currency Devaluation

question 34

Multiple Choice

How must currency contracts be structured for a currency devaluation to have a worsening effect on the balance of trade?

• A) Export contracts in domestic currency and import contracts in foreign currency
• B) Export contracts in foreign currency and import contracts in domestic currency
• C) Both contracts in domestic currency
• D) Both contracts in foreign currency

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Definitions:

Cost of Goods Sold

Costs directly related to the manufacturing of goods a company sells, which cover materials and workforce expenses.

Finished Goods Inventory

The stock of completed products that are ready to be sold but have not yet been sold.

Raw Materials Inventory

The total cost of all components and materials that a company has in stock and that are to be used in the production process.

Manufacturing Overhead Applied

The allocation of estimated manufacturing overhead costs to individual units of production.