The Marshall–Lerner condition (after Alfred Marshall and Abba P. Lerner) is the condition that an exchange rate devaluation or depreciation will only cause a balance of trade improvement if the absolute sum of the long-term export and import demand elasticities is greater than unity.
Devaluation raises the relative price of imports and since the Marshall-Lerner Condition is satisfied, the trade balance will show a surplus. Hence the money supply increases. The change in relative price also increases exports and the excess demand for exportables causes the domestic price of exportables to rise.