In absorption approach to devaluation regarding balance of payment adjustment for a given value of marginal propensity to import, which statement is correct ?
1
The trade balance will improve if marginal propensity to absorb is less than one.
2
The trade balance will worsen if marginal propensity to absorb is less than one.
3
The trade balance will worsen if marginal propensity to absorb is equal to one.
4
The trade balance will improve if marginal propensity to absorb is greater than one.