A Real Depreciation Will Initially Cause a Reduction in Output

question 50

Multiple Choice

A real depreciation will initially cause a reduction in output when which of the following holds?

• A)the Marshall-Lerner condition
• B)the J-Curve effect
• C)net exports are initially zero
• D)net exports are initially negative
• E) net exports are initially positive

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Definitions:

Aggregate Demand

The total demand for goods and services in an economy at a given overall price level and in a given time period.

Investment Goods

Long-term assets purchased for the purpose of generating income, not directly intended for consumption.

Consumer Goods

Goods that are used by consumers for personal or household purposes.

Demand For Money

The desire to hold cash or liquid assets instead of investing or spending, influenced by interest rates, financial uncertainty, and economic activity.