According to the Marshall-Lerner Condition, Currency Depreciation Has No Effect

question 96

Multiple Choice

According to the Marshall-Lerner condition, currency depreciation has no effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals

• A) 0.1.
• B) 0.5.
• C) 1.0.
• D) 2.0.

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Definitions:

Break-Even Sales

The amount of revenue needed to cover total costs, at which point a business neither makes a profit nor incurs a loss.

Margin of Safety

Represents the difference between actual or planned sales and the break-even sales, indicating the amount by which sales can drop before the business incurs a loss.

Contribution Margin Ratio

A financial metric that measures the proportion of sales revenue that exceeds variable costs, indicating how much revenue contributes to fixed costs and profit.

Variable Costs

Costs that vary in direct proportion to changes in levels of an activity or production volume.