The notion that, following a currency depreciation the balance of trade falls for a while before increasing is called an effect ?
Correct answer: C. J Curve
- A. relative price
- B. elasticity
- C. J Curve
- D. Pass through
Explanation
The J-curve effect describes a temporary worsening of the trade balance after depreciation, followed by improvement as quantities of exports and imports adjust. Existing contracts and slow volume responses cause the initial decline.
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