Re: dse 2012 macro questiom

Posted by Amrith on Mar 10, 2013; 5:52pm
URL: http://discussion-forum.276.s1.nabble.com/dse-2012-macro-questiom-tp7579810p7579811.html

answer has a: i.e, a positively slope schedule if marshall-lerner condition satisfied.

bcoz.. if e (real exchange rate) increase implies real depreciation of home currency . actually it will have two impact on net exports
 1)unambiguous increase in exports
2) on imports -it depends on volume effect or value effect. i.e to say it depends on import/export elasticities alpha and beta.
if M-L condition is not satisfied it might even deteriorate  NX.
iff M-L condition satisfied alpha +beta >1 then it improves the NX... results in a positive schedule IS CURVE (in Y-e plane)

 am i right?