Neco 2024 Economics Question 14

Practice objective / multiple choice question 14 from the 2024 Neco Economics examination.

Neco 2024 Economics Objective / Multiple Choice Medium Difficulty
Question 14 NECO • 2024 • ECONOMICS • objective

Country X runs a current‑account deficit of \$2\,billion. Its export‑price elasticity with respect to the real exchange rate is 0.4 and its import‑price elasticity is 0.6. If the real exchange rate depreciates by \(10\%\), estimate the expected percentage change in the trade balance (ignore capital flows). Will the current‑account deficit improve or worsen?

Answer Options

A. The trade balance is expected to fall by about 2 %, improving the current‑account deficit (by roughly \\$40 million).
Correct Answer B. The trade balance is expected to fall by about 2 %, worsening the current‑account deficit (by roughly \$40 million).
C. The trade balance is expected to fall by about 5 %, worsening the current‑account deficit (by roughly \\$100 million).
D. The trade balance is expected to rise by about 2 %, improving the current‑account deficit (by roughly \\$40 million).
Correct Answer
B
Correct Option:
The trade balance is expected to fall by about 2 %, worsening the current‑account deficit (by roughly \$40 million).

About This Question

This is Neco 2024 Economics Question 14. It is one of the objective questions from the 2024 Neco Economics examination.

Difficulty level: Medium .

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