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4. Suppose that U.S. dollar depreciates by 5 percent in the short run. 5 a) If the price elasticity of import demand is 0.3, and the imports are all priced in foreign currency, by what percentage will the quantity of imports and the import payments (measured in dollars) change? b) If the price elasticity of export demand is 0.5, and the exports are all priced in domestic currency, by what percentage will the quantity of exports and the export receipts (measured in dollars) change? c) If the U.S. has been having a balanced trade initially (i.e., EX = IM), what will happen to its trade balance following the 5 percent depreciation? Will it improve or deteriorate? d) If the rate of exchange rate pass-through to import prices is 0.42 (or 42%) in the U.S., how would your answers to part (a) change? 4. Suppose that U.S. dollar depreciates by 5 percent in the short run. 5 a) If the price elasticity of import demand is 0.3, and the imports are all priced in foreign currency, by what percentage will the quantity of imports and the import payments (measured in dollars) change? b) If the price elasticity of export demand is 0.5, and the exports are all priced in domestic currency, by what percentage will the quantity of exports and the export receipts (measured in dollars) change? c) If the U.S. has been having a balanced trade initially (i.e., EX = IM), what will happen to its trade balance following the 5 percent depreciation? Will it improve or deteriorate? d) If the rate of exchange rate pass-through to import prices is 0.42 (or 42%) in the U.S., how would your answers to part (a) change

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