A devaluation of domestic currency will improve the country's trade balance only if the following is true for price elasticities of demand:
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DSE 2011 Question 18: Balance of payments and exchange rates
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What this question tests
This question is on Devaluation, the Marshall-Lerner condition and the J-curve, part of Balance of payments and exchange rates in International Economics.
When a fall in the currency improves the trade balance and why it may first worsen it.
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