Assume the Canadian Demand Elasticity for Imports Equals 1

question 103

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.For Canada,the depreciation would lead to a(n) :

• 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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