The current account balance may fall after real depreciation

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Reference no: EM13800486

The current account balance may fall after a real depreciation because

a. Imports and exports are actually insensitive to the exchange rate.

b. Foreign purchasers refuse to buy home goods even though they are cheaper.

c. Import orders are placed in advance and depreciation raises the domestic price.

d. Central bank intervention will distort market mechanisms.

Reference no: EM13800486

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