Suppose that an economy is experiencing large trade deficits.According to pass-through effects,a devaluation could improve trade balance,when:
A) both demand for domestic imports and exports are perfectly inelastic.
B) both supply of domestic imports and exports are perfectly inelastic.
C) the demand for domestic imports is perfectly inelastic and the supply of domestic exports is perfectly inelastic.
D) the supply of domestic imports is perfectly inelastic and the demand for domestic exports is perfectly inelastic.

Question

Quizplus · Accepted Answer

The Answer of Suppose that an economy is experiencing large trade deficits.According to pass-through effects,a devaluation could improve trade balance,when:
A) both demand for domestic imports and exports are perfectly inelastic.
B) both supply of domestic imports and exports are perfectly inelastic.
C) the demand for domestic imports is perfectly inelastic and the supply of domestic exports is perfectly inelastic.
D) the supply of domestic imports is perfectly inelastic and the demand for domestic exports is perfectly inelastic.

Suppose That an Economy Is Experiencing Large Trade Deficits