The shorter 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

If the currency pass-through period is shorter, the required time for currency depreciation to have the intended effect on the trade balance is also shorter. This is because a shorter currency pass-through period means that changes in the exchange rate have a more immediate impact on the prices of imported goods, which in turn affects the trade balance.

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