Which condition is necessary for a country’s balance of payments on its current account to improve if it reduced its exchange rate?
1 )
Both the price elasticities of supply for its imports and its exports must be elastic.
2 )
The importing country will buy all the excess supplies of its trading partner to clear the market.
The sum of the price elasticities of domestic demand for imports and the foreign demand for exports must be greater than one.
4 )
The trading partners need to agree on the maximum prices to be charged for imports and exports.
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