Author Question: The basic assumption behind the J-curve effect is that A) supply and demand for currencies are ... (Read 45 times)

CharlieWard · **on:** Jun 30, 2018

The basic assumption behind the J-curve effect is that

A) supply and demand for currencies are less elastic in the short run than in the long run.
B) in the short run, supply will exceed demand; in the long run, they will be equal.
C) an overshooting effect occurs as people adjust to the new information.
D) investors tend to be overly cautious in currency instruments.

Question 2

The use of an absorption instrument allows a government to

A) increase or decrease national absorption.
B) change the balance between imports and exports.
C) alter the balance of payments with a specific country.
D) reduce the influence of domestic absorption on exchange rates.