Research on the relationship between elasticities and the current account balance suggests that,for the United States,currency depreciation would result in:
A) a significant improvement in the current account balance.
B) no change in the current account balance.
C) a small improvement in the current account balance.
D) a worsening of the current account balance.

Question

Quizplus · Accepted Answer

Currency depreciation can lead to a small improvement in the current account balance for the United States due to the elasticity of demand for exports and imports. While depreciation makes exports cheaper and imports more expensive, the overall impact may be limited by factors such as the price elasticity of demand for traded goods and services.

Research on the Relationship Between Elasticities and the Current Account