Apr 21 2012

Marshall-Lerner Condition

Published by at 7:43 pm under

Determines how a depreciation in a currency’s exchange rate will affect the nation’s current account balance. If the combined price elasticities of demand for exports and imports is greater than one (elastic), then a depreciation of the currency will move the current account towards surplus. But if demand for exports and imports is inelastic, a weaker currency will move the current account towards deficit.

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

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