The longer the currency pass-through period, the _______ required for currency depreciation to have the intended effect on the trade balance.
A) shorter the time period
B) longer the time period
C) larger the spending cut
D) smaller the spending cut

Question

Quizplus · Accepted Answer

A longer currency pass-through period means that it takes more time for changes in the exchange rate to affect the prices of exports and imports. Therefore, a longer time period would require a longer period of currency depreciation to have the intended effect on the trade balance.

The Longer the Currency Pass-Through Period, the _______ Required for Currency