A real depreciation will initially cause a reduction in output when which of the following holds?

Name: A real depreciation will initially cause a reduction in output when which of the following holds?
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Question

Quizplus · Accepted Answer

The J-Curve effect explains how a real depreciation initially leads to a worsening of the trade balance before improving it, implying an initial reduction in output as the country's net exports decrease in value before they start to recover and eventually increase.

A Real Depreciation Will Initially Cause a Reduction in Output