A Key Assumption to Ensure That Domestic Returns and Foreign

question 115

Multiple Choice

A key assumption to ensure that domestic returns and foreign returns are in equilibrium is:

• A) there are perfectly flexible prices.
• B) the quantity of money is fixed.
• C) there are no capital controls preventing the movement of capital.
• D) trade is not subject to any restrictions.

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Definitions:

Profit

The financial gain obtained when the revenue from business activities exceeds the expenses, costs, and taxes involved in sustaining the activity.

Long Run

A period during which all factors of production and costs are variable, allowing all inputs to be adjusted.

Profit-Maximizing

A strategy where a company seeks to achieve the highest possible profit, often by adjusting output levels or prices.

Units

Basic quantities or measures adopted to quantify and represent variables in quantitative analyses, such as units of measurement in physics or economic units in economics.