Assume That the Marshall- Lerner Condition Does Not Hold

Multiple Choice

Assume that the Marshall- Lerner condition does not hold. A decrease in the real exchange rate will tend to cause which of the following to occur?

A) A decrease in NX and a decrease in Y.
B) A decrease in NX and an increase in Y.
C) An increase in NX and an increase in Y.
D) An increase in NX and a decrease in Y.
E) A decrease in NX and a decrease in Y*.