The J-curve effect refers to the observation that ?
Correct answer: B. the trade balance usually gets worse before it improves after a currency depreciation
- A. GDP usually decreases before it increases after a currency depreciation
- B. the trade balance usually gets worse before it improves after a currency depreciation
- C. the trade balance usually gets better before it gets worse after a currency appreciation
- D. GDP usually decreases before it increases after a currency appreciation
Explanation
The J-curve describes the trade balance after a currency depreciation: it often worsens initially because import prices rise before quantities adjust, then improves as exports and import demand respond.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
The supply of foreign currency tends to be ?
In the early eighties, the Federal Reserve pursed a tight monetary policy. All else being equal. the impact of that policy was to interest rates in the United States relative to those in Europe and cause the dollar to _______ against European currencies?
A depreciation of the dollar will have its most pronounced impact on imports if the demand for imports is ?
If a nation's interest rates are relatively low compared to those of other countries then the exchange value of its currency will tend to ?
The theory of international exchange that holds that exchange rates adjust to offset differences in countries inflation rates in the ?
The fall in value of one currency relative to another is ?