The J-Curve Effect Explains That After a Currency Depreciates in Value

question 46

Multiple Choice

The J-curve effect explains that after a currency depreciates in value

• A)price effects are stronger in the short run; volume effects are stronger in the long run
• B)price effects are outweighed by volume effects in both the short and long runs
• C)volume effects are outweighed by price effects in the long run but not in the short run
• D)net exports do not suffer as the price and volume effects offset each other in the long run
• E)net exports suffer in the long run as the price effects become zero

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Definitions:

Economic Integration

The process whereby countries reduce trade and investment barriers among themselves, aiming to increase economic cooperation and interdependence.

Internal Tariffs

Taxes imposed by a government on goods and services traded within the same country.

Opportunity Cost

The value of the best alternative forgone in making any decision, a concept central in economics for understanding resource allocation.

WTO

The World Trade Organization (WTO) is an international organization that regulates international trade between nations.