IB Economics Unit 4.3: Global Economy - Exchange Rates & Balance of Payments (id

本题目来源于试卷: IB Economics Unit 4.3: Global Economy - Exchange Rates & Balance of Payments，类别为 IB经济学

[单选题]
Assume a country has a trade deficiu yytngf21b0(kev(* it and the sum of the price elao-c fzq3 :s9wtu6vdv ql4/ u;tsticities of demand for exports and imports is less than 1. What will be the impact of currwzu; o d39- /4ctutl6vqqvf :sency depreciation on the country's trade balance?

A. The trade balance will remain unchanged
B. The trade balance will improve
C. The trade balance will further deteriorate
D. The trade balance will first improve and then deteriorate


参考答案:  C


本题详细解析:

C

$\underset{‾}{\text{Explanation}}$:
The Marshall-Lerner condition states that currency depreciation will improve the trade balance only if $PEDx+PEDm>1$.

If $PEDx+PEDm<1$, depreciation will deteriorate the trade balance.

Options A, B, and D are incorrect:

• Option A: the trade balance remains unchanged if $PEDx+PEDm=1$
• Option B: the trade balance remains unchanged if $PEDx+PEDm>1$
• Option D: the trade balance will not improve until $PEDx+PEDm>1$

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