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 large decrease in the volume of imports,causing to total import expenditures to decrease.
A) perfectly inelastic
B) relatively inelastic
C) unit elastic
D) relatively elastic

Question

Quizplus · Accepted Answer

If the demand for imports is relatively elastic, it means that consumers are sensitive to changes in prices, and the increase in prices resulting from the devaluation will cause a relatively large decrease in the volume of imports. As a result, the total import expenditure will decrease even though the price has increased due to the devaluation.

Suppose a Country Devalues Its Currency