To determine the impact of changes in exchange rates on trade balance, the ‘absorption approach’ most likely exhibits the:?

Question

A. effect of changing the relative price of domestic and foreign goods.

B. effect of exchange rates on aggregate expenditure or saving decisions..

C. microeconomic view of the relationship between exchange rates and trade balance.

Haytham Ahmed · Answer

I think the correct answer from my point of view is B

Mamdouh Qutb · Answer

The impact of price Exchange by absorption method This approach is interested in analyzing the impact of raising the foreign exchange rate , or reducing the external value of the national currency , 2 On through its impact on both the income and spending nationalists , and the deficit in the balance of payments Alexander absorption as the sum of the elements of the applicationTotal demand elements And government consumption and investment spending And from the : National income = Absorption + exports - imports Which: National income - assimilation = Exports - Imports So we can deficit returned in the balance of payments resulting from the current account deficit to increase absorption or spending the elements of the value of the gross national product or national income , and therefore to treat the said deficit should be the reduction in the value of the currency to reduce the absorption works and at the same time increasing the national income enough to restore equilibrium in the balance of current payments.

Shazia Anees · Answer

A. effect of changing the relative price of domestic and foreign goods.

Zehab Osman · Answer

C------------------------------------------------

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To determine the impact of changes in exchange rates on trade balance, the ‘absorption approach’ most likely exhibits the:?

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