Assume the Canadian Demand Elasticity for Imports Equals 1

question 57

Multiple Choice

Assume the Canadian demand elasticity for imports equals 1.2, while the foreign demand elasticity for Canadian exports equals 1.8.Responding to a trade deficit, suppose the Canadian dollar depreciates by 10 percent.Other things equal, for Canada, the depreciation would lead to

• A) a worsening trade balance-a larger deficit.
• B) an improving trade balance-a smaller deficit.
• C) an unchanged trade balance.
• D) None of these are correct.

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