The absorption approach to currency depreciation is represented by one of the following equations:
A) B = Y - A
B) Y = C + I + G + (X-M)
C) I + X = S + M
D) S - I = X - M

Question

Quizplus · Accepted Answer

The absorption approach to currency depreciation states that when there is a decrease in the value of a currency, the domestic absorption decreases proportionately. This is represented by the equation B = Y - A, where B is the balance of trade, Y is national income, and A is absorption.

The Absorption Approach to Currency Depreciation Is Represented by One