Economics (AS & A Level) · May / June 2025 · Paper 34 · Question 27

The table gives the values for an economy's short-run and long-run elasticities of demand for exports and imports. In which circumstance does depreciation lead to a J curve where the current account of the balance of payments worsens in the short run and improves in the long run?

1. Ashort-run elasticity of demand for exports 0.5; short-run elasticity of demand for imports 0.2; long-run elasticity of demand for exports 0.6; long-run elasticity of demand for imports 0.6
2. Bshort-run elasticity of demand for exports 0.5; short-run elasticity of demand for imports 0.6; long-run elasticity of demand for exports 1.2; long-run elasticity of demand for imports 1.0
3. Cshort-run elasticity of demand for exports 0.6; short-run elasticity of demand for imports 0.6; long-run elasticity of demand for exports 0.5; long-run elasticity of demand for imports 0.2
4. Dshort-run elasticity of demand for exports 1.2; short-run elasticity of demand for imports 1.0; long-run elasticity of demand for exports 0.5; long-run elasticity of demand for imports 0.6

As printed in the paper