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.