curve effect (5 points). Whose standpoint is based on this theory? 2 poims 2. (8
ID: 1125260 • Letter: C
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curve effect (5 points). Whose standpoint is based on this theory? 2 poims 2. (8 points) Alex is confused by his teacher's statement: "a permanent monetary expansion under floating ex similar effects on the current account balance in the short run." Can you explain to him using DD-AA change rate regime and a currency devaluation under fixed exchange rate regime have the ? (Hint: you need to include the XX schedule.) You can assume the economy starts from a position where the current account is zero.Explanation / Answer
First question is answered below
The J curve effect, states that a country's trade deficit will initially worsen after the depreciation of its currency because higher prices on foreign imports will be greater than the reduced volume of imports, but then improve, thereby giving the curve a J shape.
It is developed on the proposition of Ian Bremmer which studies a country's trade balance after devaluation.
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