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 to total import expenditures to increase.
A) perfectly elastic
B) relatively elastic
C) unit elastic
D) relatively inelastic

Question

Quizplus · Accepted Answer

If the country's demand for imports is relatively inelastic, the increase in price resulting from the devaluation will not significantly decrease the amount of imports demanded. Thus, total import expenditures will increase despite the price increase.

Suppose a Country Devalues Its Currency