Assume That the J- Curve Exists

question 7

Multiple Choice

Assume that the J- curve exists. Which of the following will occur after a real exchange rate appreciation?

• A) The trade deficit will worsen immediately.
• B) The real exchange rate will fall temporarily before it rises.
• C) The trade deficit will improve temporarily before it worsens.
• D) The real exchange rate will rise temporarily before it falls.
• E) The trade deficit will worsen temporarily before it improves.

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