Assume That a Country Is Operating at Full Employment

Multiple Choice

Assume that a country is operating at full employment.According to the absorption approach, the only way that currency depreciation can improve the balance of trade is for the country to implement

A) expansionary fiscal policy to increase domestic spending.
B) expansionary monetary policy to increase domestic spending.
C) contractionary fiscal policy or monetary policy to cut domestic spending.
D) import tariffs and quotas that increase spending on domestically produced goods.