CFA Practice Question

There are 923 practice questions for this topic.

CFA Practice Question

Which approach predicts that if an economy operates at full employment and faces a trade deficit, currency devaluation (depreciation) will improve the trade balance only if domestic spending is cut, thus freeing resources to produce exports?
A. Elasticities approach
B. Marshall-Lerner approach
C. Absorption approach
Explanation: If the economy is at full employment, then currency depreciation must reduce domestic expenditure in order to improve the trade balance.

User Contributed Comments 0

You need to log in first to add your comment.