The J-curve illustrates the effects of

Question

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The J-curve illustrates the effects of changes in the real exchange rate on net exports. The curve shows a short-term increase in the trade deficit or decrease in the trade surplus after a depreciation in the exchange rate, followed by a longer-term improvement in the trade balance as the volume of exports increases and imports decrease. This is because it takes time for changes in relative prices to affect the volume of trade. Choice A, B, and D are not correct as they are not related to the J-curve.

The J-Curve Illustrates the Effects of