WAEC Economics 2019 Objective — Question 45

Question 45 of 50 from the West African Examinations Council (WAEC) Economics 2019 Objective paper, with the correct answer and a full explanation.

Devaluation of currency may not correct a balance of payments deficit if the demand for export is

A. perfectly inelastic
B. perfectly elasticCorrect
C. fairly elastic
D. unitary elastic

Explanation

If export demand is perfectly elastic, price is essentially fixed by the world market and a change in price (from devaluation) has no effect on quantity purchased, so devaluation cannot correct the deficit in this case.

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