Final answer:
The compensation system designed to match the purchasing power in a person's home country is called the balance-sheet approach. This approach ensures individuals working abroad receive a salary equivalent to their home country's standard of living.
Step-by-step explanation:
The compensation system designed to match the purchasing power in a person's home country is called the balance-sheet approach. This approach ensures that individuals working abroad receive a salary that is equivalent to their home country's standard of living, considering cost differences between countries. For example, a Chinese firm exporting abroad may earn U.S. dollars but will need Chinese yuan to pay its workers, suppliers, and investors based in China. By using the balance-sheet approach, the company can adjust the salaries to maintain equity and purchasing power.