Which statement is most likely to account for the current account’s performance after a devaluation, where there is a short-run worsening followed by improvement over two years?
- AIn the short run, the price elasticity of demand for exports and imports was very low.
- BThe domestic inflation rate fell after 12 months before having the desired result.
- CThe elasticity of demand for imports diminished after 12 months.
- DThe policy was ineffective and other factors must have led to an improvement in the current account.