Explain what the J-curve is and why it occurs
What will be an ideal response?
The J-curve illustrates graphically the dynamic adjustment of NX to a depreciation when the Marshall-Lerner condition does not hold initially but does hold eventually. If ML does not hold initially, a depreciation will cause NX to fall. Over time, the quantities of exports and imports will adjust causing NX to rise and eventually increase above its initial level. Tracing out the path of NX in this case resembles a J. Hence, the J-curve.
You might also like to view...
The equation of exchange can be stated as M = (V x P)/Y
a. true b. false
Which of the following information about fiat money is false? Fiat money
A) is backed by gold. B) serves as a medium of exchange. C) has little to no value except as money. D) is authorized by a central bank or governmental body.
The problem typically during a recession is not that there is too little money, but too little spending. If the problem was too little money, what would be its cause? If the problem was too little spending, what could be its cause?
What will be an ideal response?
A shift in demand toward the foreign country's goods would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment) in the economy.
A. raise; increase B. raise; decrease C. lower; decrease D. lower; increase