Author Question: The J-curve effect refers to the observation that (Read 63 times)

karateprodigy · **on:** Apr 19, 2019

Question 1

Refer to the information provided in Figure 34.4 below to answer the question(s) that follow.

Refer to Figure 34.4. The demand and supply of pounds are
S
₁ and
D
₁. Which of the following can change the equilibrium exchange rate ($/pound) to $1.50 and the equilibrium quantity to 400 pounds?

◦ British purchases of U.S.-made cars increase
◦ United States purchases of British-made cars increase
◦ the price level in Great Britain decreases
◦ income in the United States decreases

Question 2

The J-curve effect refers to the observation that

◦ the trade balance usually gets worse before it improves after a currency depreciation.
◦ GDP usually decreases before it increases after a currency appreciation.
◦ the trade balance usually gets worse before it improves after a currency appreciation.
◦ GDP usually decreases before it increases after a currency depreciation.

sarahccccc · **Reply #1 on:** Apr 19, 2019

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