The simple Marshall-Lerner condition would suggest that one of the following cases would produce a worsening of the trade balance if the country's currency depreciated. Which one? (The negative sign on elasticities is being ignored; also, assume that trade is initially balanced.) Select one: a. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.5 b. elasticity of demand for exports = 0.4; elasticity of demand for imports = 0.6 c. demand curve for exports is vertical; demand curve for imports is horizontal d. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.1

The simple Marshall-Lerner condition would suggest that one of the following cases would produce a worsening of the trade balance if the country's currency depreciated. Which one? (The negative sign on elasticities is being ignored; also, assume that trade is initially balanced.) Select one: a. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.5 b. elasticity of demand for exports = 0.4; elasticity of demand for imports = 0.6 c. demand curve for exports is vertical; demand curve for imports is horizontal d. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.1

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter29: Exchange Rates And International Capital Flows

Section: Chapter Questions

Problem 27CTQ: Suppose a country has an overall balance of trade so that exports of goods and services equal...

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