The J Curve Shows That

question 19

Multiple Choice

The J curve shows that:

• A)devaluation is more likely to improve the trade balance in the short-run than in the long-run.
• B)devaluation is more likely to improve the trade balance after a longer span of time has elapsed.
• C)devaluation is likely to be unstable.
• D)devaluation is unlikely to improve the trade balance in either the short-run or the long-run.

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Definitions:

Present Value

The today's value of money or cash flows to be received in the future, factored by a particular rate of return.

Oil Reserve

Quantities of crude oil that are held underground or in storage, available for extraction and use.

Market Rate Of Interest

The prevailing rate at which interest is paid by borrowers for loans or earned by investors in the marketplace, determined by supply and demand forces.

Market Rate Of Interest

The prevailing rate of interest determined by supply and demand in the credit market.