Economics (AS & A Level) · May / June 2025 · Paper 33 · Question 27

The diagram shows the impact of a revaluation of a country's exchange rate on the current account of the balance of payments. The table gives the price elasticity of demand for imports, PED_M, and the price elasticity of demand for exports, PED_X, in both the short run and the long run. Which combination of short run and long run elasticities will give the shape shown in the diagram?

1. Ashort run PED_M 0.2, PED_X 0.2; long run PED_M 0.4, PED_X 0.4
2. Bshort run PED_M 0.4, PED_X 0.4; long run PED_M 0.8, PED_X 0.8
3. Cshort run PED_M 0.8, PED_X 0.8; long run PED_M 1.2, PED_X 1.2
4. Dshort run PED_M 1.2, PED_X 1.2; long run PED_M 1.6, PED_X 1.6

As printed in the paper