Q. Assume the United States exports 2,000 computers at a cost of $3,000 each and imports 200 UK autos at a cost of £10,000 each. Assume which the dollar/pound exchange rate is $2.5 per pound.
Assume the dollar's exchange value depreciates by 15 percent. Assuming which the price elasticity of demand for U.S. exports equals 0.40 and the price elasticity of demand for U.S. imports equals 0.20, does the dollar depreciation improve or worsen the U.S. trade balance? Why?
Now assume which the price elasticity of demand for U.S. exports equals 2.50 and the price elasticity of demand for U.S. imports equals 1.80. Does this change the outcome? Why?