Marshall Lerner condition
Definition. The Marshall Lerner condition states that a depreciation or devaluation of a currency will improve a country trade balance only if the sum of the price elasticities of demand for its exports and imports is greater than one. Otherwise the trade balance worsens.
If demand for exports and imports is sufficiently price elastic, the rise in export volumes and fall in import volumes outweigh the dearer cost of imports. The J curve effect arises because this condition often holds only over time.
This term belongs to The Marshall Lerner Condition in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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