(Answered) 1. Under a flexible exchange rate system, a deficit in a nation’s BOP is automatically corrected by:

➤ When might depreciation fail to correct a BOP deficit?
Depreciation can fail if export plus import demand elasticities are low, so the Marshall–Lerner condition is not satisfied. High import content in exports, significant foreign-currency debt, or very inelastic import demand also weaken adjustment. The J-curve can produce a temporary deterioration before any improvement occurs.