Economic theory predicts that a currency depreciation will least lead to an improvement in the home country’s trade balance when ?

A. home demand for imports is inelastic and foreign export demand is inelastic
B. home demand for imports is elastic and foreign export demand is inelastic
C. home demand for imports is inelastic and foreign export demand is elastic
D. home demand for imports is elastic and foreign export demand is elastic

Correct Answer: home demand for imports is inelastic and foreign export demand is inelastic ✔

Last Updated: June 11, 2019