The "J-curve effect" shows:
A)the initial deterioration and the eventual improvement of a country's trade balance following a currency depreciation
B)the initial improvement and the eventual depreciation of a country's trade balance following a currency depreciation
C)the trade balance's lack of responsiveness to the exchanges rate changes
D)none of these

Question

Quizplus · Accepted Answer

The J-curve effect shows the initial deterioration and the eventual improvement of a country's trade balance following a currency depreciation. The name "J-curve" comes from the shape of the curve that represents the trade balance over time, with an initial downward slope (the top of the J) followed by an upward slope (the bottom of the J).

The "J-Curve Effect" Shows