Current account trade, How does theory hypothesize that a

Current account trade

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Reference no: EM138622

Q1. The price of good is $1.20 per unit also annual demand is 800,000 units. Market research indicates that an increase in cost of 10 cents for every unit will result in a fall in annual demand of 75,000 units. Elucidate what is the cost elasticity of demand measuring the responsiveness of demand over this range of price increase?

Q2. How does theory hypothesize that a current account trade deficit will be resolved? Why does the US's persistent current account deficit not get reduced this way, meaning what other factors are in play? What is the impact on the macro economy of the persistent current account deficit?

Reference no: EM138622

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