Whenever a Nation Has Substantial External Debts and Assets Denominated

question 140

Multiple Choice

Whenever a nation has substantial external debts and assets denominated in foreign currency:

• A) it is easier to manage, since changes in value are often offsetting.
• B) there can be large and destabilizing wealth effects.
• C) its interest payments on the debt will be matched by interest earnings on the assets.
• D) the risk of default becomes very large.

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Definitions:

Overhead Volume Variance

The difference between the budgeted and actual overhead costs attributable to a change in production volume.

Direct Labor Hours

The total hours worked by employees directly involved in the manufacturing process or production of goods.

Budgeted Overhead

The estimated costs for overhead (indirect costs such as utilities, rent, and administrative salaries) that are planned for during a specific period in the budgeting process.

Total Overhead Rate

A ratio that calculates the total indirect costs of manufacture (including both fixed and variable overheads) relative to a related cost base, typically direct labor or machine hours.