The diagram shows the aggregate demand (AD) and aggregate supply (AS) for a country. The initial equilibrium is at point E.
The sum of the price elasticities of demand for imports and exports for this country exceeds one.
A devaluation of the country’s exchange rate will cause aggregate demand to change.
What will be the new equilibrium?
1 )
A
B
3 )
C
4 )
D
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