Exchange Rates and the Balance of Payments (id: 3cf72f968)

本题目来源于试卷: Exchange Rates and the Balance of Payments，类别为 IB经济学

[单选题]
Assume a country has a trade deficit and thg(cc 8h kbdqwe gk+la270n* ;de sum of the price elasti/7y y:vglnr v/mr; ha)cities of demand for exports and imports is less than 1. What will be thvv7/hga /r: ; yymrnl)e impact of currency 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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