Assume the Marshall- Lerner condition holds. Which of the following will cause an increase in net exports?

Question

Quizplus · Accepted Answer

A real exchange rate depreciation makes exports relatively cheaper and imports relatively more expensive, thus encouraging domestic consumers to purchase domestic goods and foreign consumers to buy more domestic goods, resulting in an increase in net exports. A, D, and E may have indirect effects on net exports, but they are not directly related to the price competitiveness of a country's exports. A decrease in foreign output may or may not lead to an increase in net exports, depending on the specific circumstances.

Assume the Marshall- Lerner Condition Holds