For This Question,assume That the Marshall-Lerner Condition Does Not Hold

question 16

Multiple Choice

For this question,assume that the Marshall-Lerner condition does not hold.An increase in the real exchange rate will tend to cause which of the following to occur?

• A)a reduction in NX and a reduction in Y
• B)a reduction in NX and an increase in Y
• C)an increase in NX and a reduction in Y
• D)an increase in NX and an increase in Y

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Definitions:

Economic Contraction

A slowdown of the economy characterized by a decline in spending and during which businesses cut back on production and lay off workers.

Decline

A decrease or reduction in value, quality, or quantity over a certain period of time.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for some degree of market power.