Please discuss the volume effect and the value effect in regards to how the current account will move given a change in the real exchange rate
What will be an ideal response?
The volume effect takes place when consumer spending shifts on export and import quantities, while the value effect results when the domestic output worth of a given amount of foreign imports is changed. It is assumed that the volume effect outweighs the value effect, so that, other things equal, a real depreciation of the currency improves the current account.
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Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that:
A. plane tickets and train tickets are complements. B. plane tickets are an inferior good. C. the cross-price elasticity between plane tickets and train tickets is negative. D. the cross-price elasticity between plane tickets and train tickets is positive.
The table above lists the market shares of the twenty makers of personal computers. The four-firm concentration equals
A) 5 percent. B) 20 percent. C) 25 percent. D) 100 percent.
The distinguishing feature of a well-functioning financial market is the
A) continual increase in the liquidity of most assets. B) continual reduction in the riskiness of most assets. C) increased ease of converting common stocks into bonds. D) incorporation of available information into asset prices.
Decision makers in oligopolistic firms must devise a strategy. One that yields the highest benefit, regardless of what the other players do is a
A) pricing strategy. B) coherent strategy. C) dominant strategy. D) revenue strategy.