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The AbsorptionApproach

幫考網校2020-08-06 17:02:14
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The Absorption Approach is a method used in international trade to measure the impact of trade on a country’s economy. This approach focuses on the changes in domestic demand and production that result from changes in trade, rather than just looking at changes in exports and imports.

The basic idea behind the absorption approach is that when a country increases its exports, it will also increase its domestic production in order to meet the demand for those exports. This increased production will lead to an increase in domestic income and consumption, which will in turn lead to an increase in domestic imports.

Similarly, when a country increases its imports, it will decrease its domestic production of those goods and services, which will lead to a decrease in domestic income and consumption. This decrease in domestic income and consumption will lead to a decrease in domestic imports.

The absorption approach takes into account not only the direct effects of changes in trade on exports and imports, but also the indirect effects on domestic production, income, and consumption. This makes it a more comprehensive and accurate measure of the impact of trade on a country’s economy.

Overall, the absorption approach provides a useful tool for policymakers to assess the impact of trade on their country’s economy and to design policies that can help maximize the benefits of trade while minimizing any negative effects.
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