Reference no: EM132154156

Suppose that

1. The Elasticity of Imports in the USA in the short Run is 0.5
2. The Elasticity of Imports in Japan in the short Run is 0.4
3. The Elasticity of Imports in the USA in the long Run is 0.9

What happens to the Current Account Balance in the US if the Exchange Rate goes from Yen=$1/100 to Yen=$1/50?

A.The Current Account Balance in the US will improve in the short run and in the long run

B.The Current Account Balance in the US will deteriorate in the short run and in the long run

C.The Current Account Balance in the US will deteriorate in the short run, and improve in the long run as long as the elasticity of imports in Japan is strictly more than 0.1

D.The Current Account Balance in the US will deteriorate in the short run, and improve in the long run