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The Marshall–Lerner condition (after Alfred Marshall and Abba P. Lerner) is satisfied if the absolute sum of a country's export and import demand elasticities (demand responsiveness to price) is greater than one. If it is satisfied, then if a country begins with a zero-trade deficit then when the country's currency depreciates (e.g., it takes fewer yen to buy a dollar), its balance of trade will improve (e.g., the U.S. will develop a trade surplus with Japan). The country's imports become more expensive and exports become cheaper due to the change in relative prices, and the Marshall-Lerner condition implies that the indirect effect on the quantity of trade will exceed the direct effect of the country having to pay a higher price for its imports and receive a lower price for its exports.
Select the Venn diagram that best illustrates the relationship between the following classes.
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Select the set in which the numbers are related in the same way as are the numbers of the following sets.
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Select the option that is related to the third term in the same way as the second term is related to the first term.
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