An economy is experiencing a significant deficit on the current account of its balance of payments. The central bank decides to devalue the domestic currency.
Which of the following combinations of price elasticities of demand for exports (PEDXPED_XPEDX) and imports (PEDMPED_MPEDM) will successfully reduce this current account deficit?
PEDX=−0.3PED_X = -0.3PEDX=−0.3; PEDM=−0.5PED_M = -0.5PEDM=−0.5
PEDX=−0.2PED_X = -0.2PEDX=−0.2; PEDM=−0.9PED_M = -0.9PEDM=−0.9
PEDX=−0.4PED_X = -0.4PEDX=−0.4; PEDM=−0.4PED_M = -0.4PEDM=−0.4
PEDX=−0.6PED_X = -0.6PEDX=−0.6; PEDM=−0.3PED_M = -0.3PEDM=−0.3
38 exam-style questions on OCR A Level Economics Balance of payments. Each one has a worked solution and a mark scheme showing where the marks go.