Suppose the U.S.price elasticity of demand for imports equals 1.2 and the foreign elasticity of demand for U.S.exports equals 1.5.According to the Marshall-Lerner condition, an appreciation of the dollar's exchange value would worsen the U.S.balance of trade.

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According to the Marshall-Lerner condition, an appreciation of the dollar's exchange value would worsen the U.S. balance of trade if the sum of the price elasticities of demand for imports and exports is greater than 1. In this case, the sum is 2.7 (1.2 + 1.5), which is greater than 1, so an appreciation of the dollar's exchange value would worsen the U.S. balance of trade.