assumes a country at full employment without inflation but has a balance of payment deficits, 1....

assumes a country at full employment without inflation but has a balance of payment deficits, 1. explain why a depreciation of its currency will not correct the deficit unless real output rises or domestic expenditures fall? 2. How can domestic adsorption fall automatically as a result of the depreciation? 3. How can the government help reduce domestic absorption and make the devaluation effective?

Expert Solution

Rahul Sunny answered 2 years ago

Suppose that a nation is at full employment without inflation but has a deficit in its...

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