What economic principle states that currency depreciation or devaluation will improve the current account balance if certain conditions are met?

The correct answer highlights the Marshall-Lerner Condition, which is a key principle in international economics. This condition posits that a depreciation or devaluation of a country's currency will lead to an improvement in its current account balance, but only if the sum of the price elasticities of demand for exports and imports is greater than one.

When a currency depreciates, exports become cheaper for foreign buyers, potentially increasing demand for these goods. Meanwhile, imports become more expensive for domestic consumers, which may decrease the demand for imported goods. If the demand for exports is sufficiently elastic (meaning that consumers significantly increase their purchase of exports when prices decrease) and the demand for imports is elastic enough (meaning that consumers significantly reduce their purchase of imports when prices increase), the overall current account balance will improve as a result of increased export revenues and decreased import spending.

The other options do not directly pertain to the relationship between currency value and current account balance in this context. The J-Curve Effect, for example, describes the short-term effects of a currency depreciation, where the current account may initially worsen before improving over time. Currency Peg refers to a fixed exchange rate system, and Purchasing Power Parity concerns the relative value of currencies and inflation rates rather than current account