
Assume an economy operates at full employment and faces a trade deficit.According to the absorption approach,currency devaluation will improve the trade balance if domestic:
A) Interest rates rise,thus encouraging investment spending
B) Income rises,thus stimulating consumption
C) Output falls to a lower level
D) Spending is cut,thus freeing resources to produce exports
Correct Answer:
Verified
Q8: The extent to which a change in
Q9: The Marshall-Lerner condition deals with the impact
Q10: According to the J-curve effect,when the exchange
Q11: Complete currency pass-through arises when a 10
Q12: According to the absorption approach,the economic circumstances
Q14: If foreign manufacturers cut manufacturing costs and
Q15: Which approach predicts that if an economy
Q16: Assume the Canadian demand elasticity for imports
Q17: Which of the following is true for
Q18: Because of the J-curve effect and partial
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents