Suppose that an economy is experiencing large trade deficits. According to pass-through effects, a devaluation would always improve trade balance, when: ο οιο both demand for domestic imports and exports are perfectly inelastic. both supply of domestic imports and exports are perfectly inelastic. the demand for domestic imports is perfectly inelastic and the supply of domestic exports is perfectly inelastic. the supply of domestic imports is perfectly inelastic and the demand for domestic exports is perfectly inelastic.

Suppose that an economy is experiencing large trade deficits. According to pass-through effects, a devaluation would always improve trade balance, when: ο οιο both demand for domestic imports and exports are perfectly inelastic. both supply of domestic imports and exports are perfectly inelastic. the demand for domestic imports is perfectly inelastic and the supply of domestic exports is perfectly inelastic. the supply of domestic imports is perfectly inelastic and the demand for domestic exports is perfectly inelastic.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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