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    Question

    The absorption approach of analyzing balance

    of payment was formulated by:
    A Gustav Cassel Correct Answer Incorrect Answer
    B Sidney Alexander Correct Answer Incorrect Answer
    C Marshall-Lerner Correct Answer Incorrect Answer
    D Milton Friedman Correct Answer Incorrect Answer
    E Karl Marx Correct Answer Incorrect Answer

    Solution

    The absorption approach to the balance of payments states that a country's balance of trade will only improve if the country's output of goods and services increases by more than its absorption, where the term 'absorption' means expenditure by domestic residents on goods and services. It was formulated by Sidney Alexander.

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