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

Currency pass-through period refers to the time taken for changes in exchange rates to affect the prices of imported goods and services. If the pass-through period is longer, it means that it will take more time for the exchange rate changes to affect the prices of imports, and hence the trade balance. Therefore, a longer pass-through period requires a longer time for currency depreciation to have the intended effect on the trade balance.

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