Explain what the Marshall-Lerner condition represents. What ...

[bio_gurl]

Explain what the Marshall-Lerner condition represents.
 
  What will be an ideal response?

Question 2

What is the major reason for oil price to go up in the 1970s?
 
  A) formation of the OPEC
  B) fast of growth of emerging economies
  C) new energy
  D) higher demand from the US

[duke02]

Answer to Question 1

The Marshall-Lerner condition is the condition that must be satisfied for a real depreciation to cause an increase in net exports. The sum of the percentage changes in exports and imports must exceed the percentage change in the real exchange rate. When a real depreciation occurs, three effects occur: the quantity of exports increases, the quantity of imports falls, and the real cost of imports rise. The first two effects must offset the last effect for NX to rise.

Answer to Question 2

A

[bio_gurl]

TYSM

[DylanD1323]

Excellent