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Basic Question 12 of 15

Assume the Canadian demand elasticity for imports equals 1.2 while the foreign demand elasticity for Canadian exports equals 1.8. Responding to a trade deficit, suppose the Canadian dollar depreciates by 10 percent. For Canada, the depreciation would lead to a(n) ______

A. worsening trade balance - a larger deficit
B. improving trade balance - a smaller deficit
C. unchanged trade balance

User Contributed Comments 2

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johntan1979 Ex + Em > 1 (unit elasticity)
FozzeyBear johntan1979 you make me very angry
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes

Barnes

Learning Outcome Statements

describe exchange rate regimes and explain the effects of exchange rates on countries' international trade and capital flows

CFA® 2024 Level I Curriculum, Volume 1, Module 7.