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:

Required Rate

Often referred to as the discount rate or required rate of return, it is the minimum return an investor expects to receive for investing in a project or business.

Net Present Value

A method of evaluating the attractiveness of an investment project, by determining the present value of its expected future cash flows minus the initial investment.

Net Present Value

Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or project, calculating the difference between the present value of cash inflows and the present value of cash outflows over time.

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to present value.