IB Economics HL 4.6.7 Marshall-Lerner condition and J-curve Question Bank

Level

Marks

0

The work does not meet a standard described by the descriptors below.

1

The written response is limited.

1-2

For the idea that a depreciation makes exports cheaper (and imports more expensive) leading to increased net exports and thus causing an improvement in the current account balance.

2

The written response is accurate.

3-4

For an explanation that the effect of a depreciation, which makes exports cheaper (and imports more expensive) depends on the price elasticities of demand for exports and imports; short-term elasticities are relatively low and therefore the current account balance may worsen; only in the long term, when the Marshall-Lerner condition is satisfied, namely that the sum of these elasticities must exceed unity, will it improve.

NB It is not necessary to refer explicitly to the Marshall-Lerner condition or the J-curve effect.