Balance of payments

Question 6

An economy is experiencing a persistent current account deficit. The government decides to devalue the domestic currency by 8%. Economists estimate that the price elasticity of demand for the country's exports is -0.65.

According to the Marshall-Lerner condition, for this devaluation to successfully improve the balance of trade in the long run, the price elasticity of demand for its imports (expressed as a positive value) must be:

greater than $0.35$

less than $0.35$

greater than $1.65$

less than $0.65$

Balance of payments

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Question 6

An economy is experiencing a persistent current account deficit. The government decides to devalue the domestic currency by 8%. Economists estimate that the price elasticity of demand for the country's exports is -0.65.

According to the Marshall-Lerner condition, for this devaluation to successfully improve the balance of trade in the long run, the price elasticity of demand for its imports (expressed as a positive value) must be:

greater than $0.35$

less than $0.35$

greater than $1.65$

less than $0.65$

Balance of payments

Question 6

Balance of payments Questions

Balance of payments

Question 6

Balance of payments Questions