The absorption approach to the balance of trade is concerned with how changing relative prices of domestic and foreign goods will change the balance of trade.

Question

Quizplus · Accepted Answer

The absorption approach to the balance of trade focuses on the relationship between a country's total output (GDP) and its total domestic absorption (the total amount of goods and services consumed domestically), rather than directly on changing relative prices of domestic and foreign goods.

The Absorption Approach to the Balance of Trade Is Concerned