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Assume an Economy Operates at Full Employment and Faces a Trade

Question 13

Multiple Choice
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:

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

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