Table 1 USA Japan Demand for imports (before $-devaluation) 200 400 Demand for imports (after $-devaluation)...

Table 1

	USA	Japan
Demand for imports (before $-devaluation)	200	400
Demand for imports (after $-devaluation)	200	800
Price of imports, in foreign currency (before $-devaluation)	10	100

For questions 15,16 and 17 refer to Table 1

Suppose the $ is devalued: we go from Yen = $1/100 to Yen = $1/10. What is the elasticity of demand for imports in the USA?
1. 0
2. 1
3. 0.5
4. -0.5
Suppose the $ is devalued: we go from Yen = $1/100 to Yen = $1/10. What is the elasticity of demand for imports in Japan?
1. 0
2. 1.11
3. 0.11
4. 2.22
Does the Marshal-Lerner condition hold in this example?
1. Yes
2. No
3. Maybe
4. Not enough information

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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