CAIE A-Level Economics 11.2.5 Marshall-Lerner Condition and J-Curve

CAIE A-Level Economics 11.2.5 Marshall-Lerner Condition and J-Curve
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise applying export and import elasticities to the Marshall-Lerner condition and interpreting why depreciation may worsen the current account before improving it along a…

How this is tested

  • add absolute export and import PED values to test whether the Marshall-Lerner condition holds
  • interpret J-curve diagrams using inelastic short-run and more elastic long-run responses
  • evaluate whether depreciation improves the current account through elasticities, time and capacity

Question 29

[Maximum number: 1]

An economy has a large surplus on the current account of its balance of payments. It revalues its currency. The current account of the balance of payments becomes a greater surplus in the short run. In the long run the surplus becomes smaller and eventually becomes a deficit.

What is the sum of the price elasticities of imports and exports in the short run and in the long run?

short run

long run

greater than 1.0

greater than 1.0

greater than 1.0

less than 1.0

less than 1.0

greater than 1.0

less than 1.0

less than 1.0