An economy’s current account within the balance of payments is showing a surplus. The government then revalues the exchange rate. Suppose the Marshall-Lerner condition is satisfied. Which diagram illustrates the effect on the current account balance?
- ADiagram A (current account balance over time: surplus falls then deficit)
- B[IMAGE:9708_w19_qp_12_p12_diagram_2]
- C[IMAGE:9708_w19_qp_12_p12_diagram_3]
- D[IMAGE:9708_w19_qp_12_p12_diagram_1]