Assume that the J- curve exists. Which of the following will occur after a real exchange rate appreciation?
A) The trade deficit will worsen immediately.
B) The real exchange rate will fall temporarily before it rises.
C) The trade deficit will improve temporarily before it worsens.
D) The real exchange rate will rise temporarily before it falls.
E) The trade deficit will worsen temporarily before it improves.
Correct Answer:
Verified
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