Assume the Canadian Demand Elasticity for Imports Equals 0

question 23

Multiple Choice

Assume the Canadian demand elasticity for imports equals 0.2,while the foreign demand elasticity for Canadian exports equals 0.3.Responding to a trade deficit,suppose the Canadian dollar depreciates by 20 percent.For Canada,the depreciation would lead to a:

• A) Worsening trade balance--a larger deficit
• B) Improving trade balance--a smaller deficit
• C) Unchanged trade balance
• D) None of the above

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Definitions:

Liabilities

Economic obligations or debts owed by a business to others, typically arising in the course of its operations.

Economic Benefits

Benefits that can be quantified in monetary terms and usually include profits, revenues, and savings.

Future Cash Inflows

Expected receipts of cash in the future from investments, operations, or financing activities.