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12th
grade
Test your understanding: Marshall Lerner Condition + J Curve
20 questions
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- 1. Multiple Choice
The Marhsall Lerner Condition is designed to answer which question?
How long will the coronavirus epidemic last?
Will the current account improve following a depreciation?
Is a depreciation good or bad?
Will a currency depreciate?
- 2. Multiple Choice
Which of these correctly states the Marshall Lerner Condition:
PED Imports + PED Exports > 1
PED Imports - PED = 1
PED Imports + PED Exports > -1
PED Imports + Ped Exports must both be elastic
- 3. Multiple Choice
The ________________ explains why it may take up to two years for a currency depreciation to make significant reductions in a nation’s trade deficit.
Marshall Lerner Condition
J Curve effect
SPICED
use of monetary policy
- 4. Multiple Choice
The Marshall Lerner Condition deals with the impact of a depreciation on:
The price of imports
The current account
The budget deficit
The value of the currency
- 5. Multiple Choice
According to the Marshall Lerner the current account will improve, following a depreciation if:
The PED of exports and Imports added up are greater than 1
Imports are price elastic
There is a J Curve effect
Exports and Imports are both price inelastic
- 6. Multiple Choice
In which of these situations will the current account improve following a depreciation
PED Imports = -0.6, PED imports = -0.3
PED Imports = 0.6, PED imports = 0.5
PED Imports = -0.6, PED imports = -0.5
PED Imports = -0.6, PED imports = -0.6
PED Imports = 0.6, PED imports = 0.6
- 7. Multiple Choice
In which of the following situations would the current account get worse following a depreciation:
PED Imports = -0.6, PED imports = -0.3
PED Imports = -0.2, PED imports = -0.3
PED Imports = -0.6, PED imports = -1.3
PED Imports = 1.6, PED imports = 0.1
PED Imports = 0.06, PED imports = 0.3
- 8. Multiple Choice
Which of the following situations would you expect J Curve effect.
Short term Ped Exp + Ped Imports = 0.8; Long term Ped Exp + Ped Imports = 1.2
Short term Ped Exp + Ped Imports = 1.8; Long term Ped Exp + Ped Imports = 1.2
Short term Ped Exp + Ped Imports = 1.2; Long term Ped Exp + Ped Imports = 0.82
Short term Ped Exp + Ped Imports = -0.5; Long term Ped Exp + Ped Imports = -1.2
Short term Ped Exp + Ped Imports = -0.8; Long term Ped Exp + Ped Imports = -0.2
- 9. Multiple Choice
In which of these would you expect to see a J curve effect
Short term ML condition met; Long Term ML condition not met
Short term ML condition not met; Long Term ML condition not met
Short term ML condition not met; Long Term ML condition met
Short term ML condition met; Long Term ML condition met
- 10. Multiple Choice
Which of these suggest a J Curve effect
Short term Ped Exp + Ped Imports = 0.6; Long term Ped Exp + Ped Imports = 0.8
Short term Ped Exp + Ped Imports = 0.8; Long term Ped Exp + Ped Imports = 0.8
Short term Ped Exp + Ped Imports = 1.2 ; Long term Ped Exp + Ped Imports = 1.2
Short term Ped Exp + Ped Imports = 0.8; Long term Ped Exp + Ped Imports = 1.2
Short term Ped Exp + Ped Imports = 1.2; Long term Ped Exp + Ped Imports = 0.8
- 11. Multiple Choice
A J curve suggests that:
Imports and exports are price inelastic in the short run but elastic in the long run
Imports and exports are price inelastic in the short run and in the long run
Imports and exports are price elastic in the short run and in the long run
Imports and exports can be either price inelastic or price elastic
- 12. Multiple Choice
The J Curve is based on the idea that
PED increases over time
PES increases over time
PED decreases over time
PES decreases over time
- 13. Multiple Choice
In which situation would you most expect the Marshall Lerner Condition to hold
A country imports necessities and exports high end manufactured goods
A country imports and exports basic manufactured goods
A country exports specialised financial service
- 14. Multiple Choice
At which point is the Marshall Lerner condition first met
point X
point Y
Point Z
- 15. Multiple Choice
In which country will the current account improve following a depreciation
Country A and Country B
Country B and Country C
Country B
Country C
- 16. Multiple Choice
If the Marshall Lerner condition is NOT met then
The currency will appreciate
The currency will depreciate
The current account will get worse and worse
The current account will get worse following a depreciation
- 17. Multiple Choice
A country finds that its trade deficit gets bigger following a depreciation. This suggests:
Its imports and exports are relatively inelastic
It some depreciate its currency more
There is a J Curve effect
There is no J curve effect
- 18. Multiple Choice
If evidence suggests that a country meets the Marshall Lerner condition and they have a current account deficit, then:
They might consider pushing down the value of their currency
They might consider pushing up the value of their currency
They should use expansionary fiscal policy
They should expect a J Curve effect
- 19. Multiple Choice
The J Curve can be explained by the fact that
Price elasticity of demand increases over time
People only import necessities
Imported goods are more expensive
Price elasticity of supply increases over time
- 20. Multiple Choice
Which of these does NOT meet the Marshall Lerner Condition
Ped Exports + Ped Imports = -2
Ped Exports + Ped Imports = 2
Ped Exports + Ped Imports = -0.2
Ped Exports + Ped Imports = 1.2
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