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Question:
The J-curve, in the context of trade between two countries, refers to the fact that when the domestic country has a trade deficit:
A
appreciation of the foreign currency will initially increase the trade deficit but will decrease the trade deficit in the long term.
explanation
The J-curve effect refers to a plot of the trade deficit over time when the domestic currency depreciates (the foreign currency appreciates). The trade deficit gets worse; initially but then improves over time
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