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Economics, Accounting & Business: Post your doubts here!

AlphaBeta

AlphaBeta

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Is Marshall Lerner condition only applied when a country's exchange rate devalues ? not when it depreciates ?
 
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Sarah Paul

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SamiaSaad said:
^ It's applied to both
Click to expand...

Isnt it only for devaluation
Coz in depreciation it get adjusts on its own bt only in devaluation the government ddevalues ithe currency to any rate they want
But in depreciation no one can depreciate the currency to any value they want ryt?
 
AlphaBeta

AlphaBeta

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Shara Nafaz said:
Isnt it only for devaluation
Coz in depreciation it get adjusts on its own bt only in devaluation the government ddevalues ithe currency to any rate they want
But in depreciation no one can depreciate the currency to any value they want ryt?
Click to expand...
its for both and also could apply in appreciation too
 
SamiaSaad

SamiaSaad

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unique111 said:
Can somebody explain marshall lerners and J curve? :/
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The Marshall Lerner Condition states that price elasticity of demand of the imports and exports have an affect on the improvement and worsening of the balance of payment. When PED is Elastic, devaluation/depreciation of the currency will lead to an improvement in B.O.P as imports will become expensive and exports will become cheaper and revaluation/appreciation currency will lead to worsening in B.O.P as imports will become cheaper and exports will become expensive.
When PED in inelastic, devaluation/depreciation will lead to worsening of B.O.P as imports are expensive and exports are cheaper and revaluation/appreciation will lead to improvement as exports are expensive and imports are cheaper.
The J-curve shows the short term affect on the B.O.P after revaluation/appreciation and devaluation/depreciation of the currency.

I'll post a little more about the J-Curve later.
 
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unique111

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*Somebody, please explain how imposing tariffs will make price of imports fall? I thought tariffs raised import price, thus discouraging people to buy foreign products. :/
*And why government may gain from inflation?
*What is the correlation between inflation and exchange rate?
**Help much appreciated!** :)
 
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unique111

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SamiaSaad said:
Lol Tariff is a tax and taxes are supposed to increase the price of a product.
Click to expand...
yeah...until i came across (i forgot where) sth that said, "to cover the tax , foreign producers are likely to raise price of the imports. If tariffs are large enough, the price of imports may fall!")
 
SamiaSaad

SamiaSaad

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unique111 said:
yeah...until i came across (i forgot where) sth that said, "to cover the tax , foreign producers are likely to raise price of the imports. If tariffs are large enough, the price of imports may fall!")
Click to expand...

I think it might have been quantity of imports that have decreased because tariffs can't lead to decrease in import prices.
 
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