Economics · Balance of Payments
Arrange the following stages in the correct logical and chronological sequence regarding the impact of currency depreciation on a nation's trade balance: 1. Domestic currency undergoes depreciation in the foreign exchange market. 2. The trade balance initially worsens as the value of imports rises immediately (Short Run). 3. The sum of price elasticities of demand for exports and imports exceeds unity (|Ex| + |Em| > 1). 4. Quantities of exports and imports adjust as buyers respond to new relative prices. 5. The trade balance improves and moves toward a surplus (Long Run). Select the correct answer using the code given below:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 11, 4, 2, 3, 5
- 22, 1, 4, 3, 5
- 31, 3, 2, 5, 4
- 41, 2, 3, 4, 5✓
Correct answer
1, 2, 3, 4, 5
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