Sams mentor at the firm told him that the stipulates

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Exploring Microeconomics
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Chapter 4 / Exercise 2
Exploring Microeconomics
Sexton
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14) Sam's mentor at the firm told him that the ________ stipulates that an identical product must have an identical price in all countries when the price is expressed in a common currency.1.A) exchange price2.B) law of one price3.C) fixed exchange-rate system4.D) floating exchange-rate systemAnswer: B
AACSB: Analytical thinkingSkill: ApplicationDifficulty: EasyLO: 10.1: Describe the importance of exchange rates to business activities.15) A company can improve its profits by selling in a country with a strong currency and sourcing from a country with a weak currency.
AACSB: Application of knowledgeSkill: Concept
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Exploring Microeconomics
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Chapter 4 / Exercise 2
Exploring Microeconomics
Sexton
Expert Verified
Difficulty: ModerateLO: 10.1: Describe the importance of exchange rates to business activities.16) Translating subsidiary earnings from a strong host currency into a weak home currency increases stated earnings in the home currency.
AACSB: Application of knowledgeSkill: ConceptDifficulty: ModerateLO: 10.1: Describe the importance of exchange rates to business activities.17) The intentional lowering of the value of a currency by a nation's government is called revaluation.
AACSB: Application of knowledgeSkill: ConceptDifficulty: EasyLO: 10.1: Describe the importance of exchange rates to business activities.18) Devaluation lowers the price of a country's exports in the global market and increases the price of its imports.
AACSB: Application of knowledgeSkill: ConceptDifficulty: ModerateLO: 10.1: Describe the importance of exchange rates to business activities.19) Currency devaluation increases consumers' buying power.
AACSB: Application of knowledgeSkill: ConceptDifficulty: EasyLO: 10.1: Describe the importance of exchange rates to business activities.20) In order to capture the gains from currency translation, managers prefer exchange rates that are volatile and unpredictable.
AACSB: Application of knowledgeSkill: ConceptDifficulty: EasyLO: 10.1: Describe the importance of exchange rates to business activities.21) As the unpredictability of exchange rates increases, so does the cost of insuring against the accompanying risk.
AACSB: Application of knowledgeSkill: ConceptDifficulty: ModerateLO: 10.1: Describe the importance of exchange rates to business activities.22) Predictable exchange rates increase the need for currency hedging.
AACSB: Application of knowledgeSkill: ConceptDifficulty: Moderate
LO: 10.1: Describe the importance of exchange rates to business activities.23) Inflation is a result of the supply and demand for a currency.
AACSB: Application of knowledgeSkill: ConceptDifficulty: EasyLO: 10.1: Describe the importance of exchange rates to business activities.24) Low unemployment rates can lead to higher inflation.
AACSB: Application of knowledgeSkill: ConceptDifficulty: EasyLO: 10.1: Describe the importance of exchange rates to business activities.

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