________ suggests that the depreciation of a nation's currency may have an ambiguous effect on its balance of trade.

Question

Quizplus · Accepted Answer

The J-curve effect suggests that in the short run, a depreciation of a nation's currency may worsen the balance of trade due to higher prices of imports and lower competitiveness of exports. However, in the long run, the balance of trade may improve due to increased export competitiveness and potential decreases in import demand. Therefore, the effect on the balance of trade is ambiguous.

________ Suggests That the Depreciation of a Nation's Currency May