National currency of a country N is devaluated by 15%. The coefficient of price elasticity of...

 

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National currency of a country N is devaluated by 15%. The coefficient of price elasticity of exports demand (EpX) is estimated at 1.2 while the coefficient of price elasticity of imports demand (EpM) is supposed to equal 0.8. Find whether the devaluation will improve the trade balance of the country. Prove your answer with calculations of AX (change in export revenues) and AM (change in import expenditures). National currency of a country N is devaluated by 15%. The coefficient of price elasticity of exports demand (EpX) is estimated at 1.2 while the coefficient of price elasticity of imports demand (EpM) is supposed to equal 0.8. Find whether the devaluation will improve the trade balance of the country. Prove your answer with calculations of AX (change in export revenues) and AM (change in import expenditures).

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To determine whether the devaluation will enhance the country Ns trade balance we must calculate the changes in export revenues AX and import expendit... View the full answer