Post Utme Covenant University 2021 Economics Question 11

Practice objective / multiple choice question 11 from the 2021 Post Utme Covenant University Economics examination.

Post Utme Covenant University 2021 Economics Objective / Multiple Choice
Question 11 POST_UTME_COVENANT_UNIVERSITY • 2021 • ECONOMICS • objective

The Marshall-Lerner condition states that if the sum of the elasticities of demand for imports and exports is greater than 1, then a devaluation of the currency will lead to an improvement in the balance of payments. Which of the following statements is a correct interpretation of the Marshall-Lerner condition?

Answer Options

A. A devaluation of the currency will lead to a decrease in imports and an increase in exports.
B. A devaluation of the currency will lead to an increase in imports and a decrease in exports.
Correct Answer C. A devaluation of the currency will lead to an improvement in the balance of payments if the sum of the elasticities of demand for imports and exports is greater than 1.
D. A devaluation of the currency will lead to a decrease in exports and an increase in imports.
Correct Answer
C
Correct Option:
A devaluation of the currency will lead to an improvement in the balance of payments if the sum of the elasticities of demand for imports and exports is greater than 1.

About This Question

This is Post Utme Covenant University 2021 Economics Question 11. It is one of the objective questions from the 2021 Post Utme Covenant University Economics examination.

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