Question

A fall in the value of pound is likely to decrease spending on imports if

ans me fast
1 demand for import is price elastic
2. demand for import is price in elastic
3. demand for imports has a unit price elasticity
4. demand for export is price elastic​

Answer 1

Option “A” is correct i.e. demand for import is price elastic.

• An upgrading in the terms of trade will worsen the balance of expenses current account if the demand for exports and imports is price elastic and progress it if demand for exports and imports is price inelastic.

• A worsening in the terms of trade will deteriorate the balance of payments present account if the demand for exports and imports is price inelastic and progress it if demand is price elastic.

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