Which of the following is true for the J-curve effect? It:
A) Applies to the interest rate effects of currency depreciation
B) Applies to the income effects of currency depreciation
C) Suggests that demand tends to be most elastic over the long run
D) Suggests that demand tends to be least elastic over the long run

Question

Quizplus · Accepted Answer

The J-curve effect suggests that after a currency depreciation, a country's trade balance may initially worsen before improving over time as demand becomes more elastic in the long run.

Which of the Following Is True for the J-Curve Effect