Assume that the price and volume index for Pakistani exports and imports are at 100 in year
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Assume that the price and volume index for Pakistani exports and imports are at 100 in year t. Assume that the Pakistani rupee devalues by 10% relative to the U.S. dollar. Assume that the elasticity of Pakistani exports is equal to 2.5 and its elasticity of imports is equal to 2. What will be the growth (positive or negative) in exports and imports from Pakistan (traded in dollars)? What effect will this have on Pakistan's balance of trade? You can answer this question without knowing what the effective current balance of trade is.
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Step by Step Answer:
To analyze the impact of a 10 devaluation of the Pakistani rupee on the countrys exports imports and balance of trade we can use the concept of price ...View the full answer
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