Following a depreciation of its domestic currency, a country’s balance of trade will only improve if the Marshall-Lerner condition is satisfied. The table below displays the price elasticities of demand (PED) for imports and exports for four distinct economies:
| Economy | Price Elasticity of Demand for Imports (PEDmPED_mPEDm) | Price Elasticity of Demand for Exports (PEDxPED_xPEDx) |
|---|---|---|
| Aloria | -0.35 | -0.45 |
| Bravos | -0.48 | -0.57 |
| Corillia | -0.25 | -0.65 |
| Delos | -0.52 | -0.38 |
Which of these economies will experience an improvement in its balance of trade following a currency depreciation?
Aloria
Bravos
Corillia
Delos
30 exam-style questions on OCR A Level Economics Exchange rates. Each one has a worked solution and a mark scheme showing where the marks go.