Makes sense epoh. If they say “Stockco is only sensitive to changes in the value of the U.S. dollar” and they have measured that sensitivity to be 1.2 as reflected in this sentence “Lee has measured the sensitivity of Stockco to changes in the value of the U.S. dollar to be 1.2” Then there is surely no need of adding a 1 to 1.2. We should take the 1.2 as in for the calculation. Thanks, aaa well… I have not yet taken my Toefl yet.
For the first question, since trade balance is net exports and a negative trade balance would indicate you are importing more than you are exporting, wouldn’t an increase in the cost of imports lower the amount of imports and narrow the trade balance, not widen it? If 0 is a ‘neutral’ trade balance and you start of with balance of -5(5 imports, 0 exports) then you lower imports due to increased cost(3 imports, 0 exports) your balance has narrowed, yes? What I am missing?
Read the portion on the J-curve effect its like 1 paragraph in port mgt that explains it well
yep, the J curve. i forgot about it and stupidly went for the long term answer. note to self- if they say SHORT RUN, think J curve effects and don’t be fooled. PM/econ- tons of overlap this year international stuff. lots of potential for a vignette or 2 between them.