A devaluation of a country's currency to improve its trade deficit would most likely benefit a producer of: A. export goods that have no close substitutes. B. an export good that represents a relatively small proportion of consumer expenditures. C. luxury goods for export. Hint: A devaluation of the currency will reduce the price of export goods in foreign currency terms. The greatest benefit would be to producers of goods with more elastic demand. Luxury goods tend to have higher elasticity of demand, while goods that have no close substitutes or represent a small proportion of consumer expenditures tend to have low elasticities of demand
A devaluation of a country's currency to improve its trade deficit would most likely benefit a producer of: A. export goods that have no close substitutes. B. an export good that represents a relatively small proportion of consumer expenditures. C. luxury goods for export. Hint: A devaluation of the currency will reduce the price of export goods in foreign currency terms. The greatest benefit would be to producers of goods with more elastic demand. Luxury goods tend to have higher elasticity of demand, while goods that have no close substitutes or represent a small proportion of consumer expenditures tend to have low elasticities of demand
Chapter4: The Aggregate Economy
Section: Chapter Questions
Problem 5E
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28. A devaluation of a country's currency to improve its trade deficit would most likely benefit a
producer of:
A. export goods that have no close substitutes.
B. an export good that represents a relatively small proportion of consumer expenditures.
C. luxury goods for export.
Hint: A devaluation of the currency will reduce the price of export goods in foreign currency terms.
The greatest benefit would be to producers of goods with more elastic demand. Luxury goods tend to
have higher elasticity of demand , while goods that have no close substitutes or represent a small
proportion of consumer expenditures tend to have low elasticities of demand.
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