The Marshall-Lerner condition deals with the impact of currency depreciation on:
A) Domestic income
B) Domestic absorption
C) Purchasing power of money balances
D) Relative prices

Question

Quizplus · Accepted Answer

The Marshall-Lerner condition focuses on the impact of currency depreciation on the relative prices of goods and services, specifically whether the sum of price elasticities of exports and imports is greater than one. This condition must be satisfied for a currency depreciation to improve the trade balance in the long run.

The Marshall-Lerner Condition Deals with the Impact of Currency Depreciation