Marshall-Lerner Condition
What Marshall-Lerner Condition means in Economics A-Level, as defined for AQA, Pearson Edexcel.
Definitions of Marshall-Lerner Condition
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Reference: AQA
The condition that states a currency depreciation will improve the current account balance only if the sum of the absolute values of the price elasticity of demand for exports and the price elasticity of demand for imports exceeds unity: |PED_X| + |PED_M| > 1.
The condition that a currency devaluation will only improve the trade balance if the sum of the price elasticities of demand for exports and imports is greater than one.
Topics that use Marshall-Lerner Condition
- The balance of payments (AQA A-Level)
- International economics (Pearson Edexcel A-Level)
Related terms
- Current account
- Balance of payments
- Capital account
- Comparative advantage
- Competitiveness
- Current account deficit
- Exchange rates
- Expenditure-reducing policies
Using Marshall-Lerner Condition in the exam
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