If the elasticities of supply of exports and imports are large in relation to the elasticity of demand…

Let Sx and Sm be the elasticities of supply of exports and imports, and Dx and Dm the elasticities of demand for exports and imports. A devaluation tends to lower the foreign-currency price of exports and raise the domestic-currency price of imports. Working out the price changes in each market shows that the proportional change in the terms of trade (export prices relative to import prices in a common currency) has the sign of (Dx × Dm − Sx × Sm). Hence devaluation worsens the terms of trade when the product of the supply elasticities exceeds the product of the demand elasticities, improves them when the product of the demand elasticities is larger, and leaves them unchanged only when the two products are equal (the Bickerdike-Robinson analysis). With supply elasticities large relative to demand elasticities, devaluation therefore worsens the terms of trade. 'Not affect' needs the two products to be equal, 'improve' needs demand elasticities to dominate, and the 'all of' option is wrong because the stated condition gives one determinate outcome.