Multiple choice

Match the following

 
List-I
List-Il
1. Income effect of devaluations
(i) Depreciation
2. Price effect of devaluation
(ii) Elasticity approach
3. A measure to correct disequilibrium in BOP
(iii) S.D. Rs
4. International liquidity
(iv) Absorption approach

  1. 1-(ii), 2-(i), 3-(iii), 4-(iv)

  2. 1-(iv), 2-(iii), 3-(ii), 4-(i)

  3. 1-(iv), 2-(ii), 3-(i), 4-(iii)

  4. 1-(iii), 2-(ii), 3-(i), 4-(iv)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The correct matching pairs economic concepts with their theoretical frameworks: the absorption approach analyzes the income effect of devaluations (how spending-absorption changes affect trade), the elasticity approach examines price effects (how devaluation affects trade through price competitiveness), depreciation is a direct policy tool to correct BOP disequilibrium, and S.D. Rs (Special Drawing Rights) constitute international liquidity. The absorption approach focuses on spending-income relationships while the elasticity approach focuses on relative price changes.

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