The more elastic is a nation's demand and supply of foreign exchange the:
A)larger is the devaluation or depreciation required to correct a deficit of a given size in the nation's balance of payments
B)smaller is the devaluation or depreciation required to correct a deficit of a given size in the nation's balance of payments
C)less feasible is a flexible exchange rate system
D)less feasible is a devaluation as a policy to correct a deficit in the nation's balance of

Question

Quizplus · Accepted Answer

The more elastic the demand and supply of foreign exchange, the more responsive they will be to changes in the exchange rate. This means that a smaller devaluation or depreciation will be required to correct a deficit of a given size in the nation's balance of payments. In other words, a more elastic response will make it easier to correct imbalances in the balance of payments without resorting to extreme measures like large devaluations or depreciations of the currency.

The More Elastic Is a Nation's Demand and Supply of Foreign