Net Capital Outflow Is Defined as the Purchase of

question 95

Multiple Choice

Net capital outflow is defined as the purchase of

• A)foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
• B)foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
• C)domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
• D)domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

---

Definitions:

Absorption Costing

Absorption costing is an accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed manufacturing overhead.

Fixed Manufacturing Overhead

Costs that do not change with the level of production activity, such as salaries of managers, depreciation of factory equipment, and utility costs of the factory.

Absorption Costing

A product costing technique that assigns all costs of production (both variable and fixed) to the product, including overheads, to calculate its full cost.