Suppose a country devalues its currency.If the country's demand for imports is ______, the price increase resulting from the devaluation results in a relatively small decrease in the volume of imports, causing total import expenditures to increase.

Question

Quizplus · Accepted Answer

If the country's demand for imports is relatively inelastic, then the price increase resulting from the devaluation would not significantly decrease the volume of imports. Therefore, total import expenditures would increase even with a devalued currency.

Suppose a Country Devalues Its Currency