What condition must hold for a country’s balance of payments on its current account to improve after it lowers its exchange rate?
- ABoth the price elasticities of supply for its imports and its exports must be elastic.
- BThe importing country will buy all the excess supplies of its trading partner to clear the market.
- CThe sum of the price elasticities of domestic demand for imports and the foreign demand for exports must be greater than one.
- DThe trading partners need to agree on the maximum prices to be charged for imports and exports.