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The Reltaionship between Devaluation and Inflation

Essay specific features

 

Issue:

Miscellaneous

 

Written by:

Marilyn J

 

Date added:

July 31, 2014

 

Level:

University

 

Grade:

A

 

No of pages / words:

2 / 333

 

Was viewed:

5849 times

 

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Essay content:

consumer spending is low) then there is unlikely to be demand pull inflation. (X-M is not the biggest component of AD) c) Also if exports are cheaper then the effect on AD depends upon the elasticity of demand. IF demand is inelastic there will only be a small increase in Quantity and there could be a fall in the value of exports (Marshall Lerner condition states devaluation only increases AD if PEDx + PEDm >1) Secondly, if there is a devaluation then there will be an increase in the price of imported goods...
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(X-M is not the biggest component of AD) c) Also if exports are cheaper then the effect on AD depends upon the elasticity of demand. IF demand is inelastic there will only be a small increase in Quantity and there could be a fall in the value of exports (Marshall Lerner condition states devaluation only increases AD if PEDx + PEDm >1) Secondly, if there is a devaluation then there will be an increase in the price of imported goods...
displayed next 300 characters

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