Q
Economic theory predicts that a currency depreciation will least lead to an improvement in the home country’s trade balance when ?
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A
A. home demand for imports is inelastic and foreign export demand is inelastic
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B
B. home demand for imports is elastic and foreign export demand is inelastic
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C
C. home demand for imports is inelastic and foreign export demand is elastic
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D
D. home demand for imports is elastic and foreign export demand is elastic
Correct Answer:
A. A. home demand for imports is inelastic and foreign export demand is inelastic
