How does the devaluation of a currency affect exports when the foreign demand elasticity for export goods is at a specific level?

Multiple choice question for Basic of Economics. Select an option, then review the explanation below.

Explanation

The impact of currency devaluation on exports depends on the price elasticity of demand in foreign markets. When the elasticity of demand for export goods is exactly one, meaning unitary elasticity, the percentage change in quantity demanded equals the percentage change in price, making devaluation effective in increasing export revenue.

Practice related questions from the same subject.

1.Which of the following best describes deflation?
2.Under what condition can two nations benefit from engaging in international trade?
3.Which of the following represents a legitimate form of currency?
4.Which political ideology is best summarized by the phrase, "From each according to his ability, to each according to his needs"?
5.Which type of currency experiences a decline in its exchange rate due to a continuous balance of payments deficit?

How does the devaluation of a currency affect exports when the foreign demand elasticity for export goods is at a specific level?

Explanation

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