An economy is experiencing a persistent current account deficit, and the central bank decides to allow the exchange rate to depreciate. If the price elasticity of demand for this country's exports is measured as -0.4, which of the following conditions must be met for the currency depreciation to successfully improve the balance of payments on current account?
The price elasticity of demand for imports (PEDmPED_mPEDm) must have an absolute value less than 0.60.60.6 (∣PEDm∣<0.6|PED_m| < 0.6∣PEDm∣<0.6).
The price elasticity of demand for imports (PEDmPED_mPEDm) must have an absolute value greater than 1.41.41.4 (∣PEDm∣>1.4|PED_m| > 1.4∣PEDm∣>1.4).
The price elasticity of demand for imports (PEDmPED_mPEDm) must have an absolute value greater than 0.60.60.6 (∣PEDm∣>0.6|PED_m| > 0.6∣PEDm∣>0.6).
The income elasticity of demand for imports must be negative (YEDm<0YED_m < 0YEDm<0).
