CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

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
Correct Answer: B

This is because the both demands are elastic.

User Contributed Comments 2

User Comment
johntan1979 Ex + Em > 1 (unit elasticity)
FozzeyBear johntan1979 you make me very angry
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