Balance of Payments-Mechanism of Adjustments (IEcoS (Economic Services) Economics Paper-2): Questions 1 - 1 of 1

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Question number: 1

» Balance of Payments » Mechanism of Adjustments


Appeared in Year: 2018

Essay Question▾

Describe in Detail

With respect to devaluation, explain the J curve effect.


Devaluation leads to worsening of the balance of trade and payments initially but subsequently it may result in the improvement in the balance of trade and payments’

The J-curve depicts the worsening of balance of payments deficit in the short run and improvement of it in the long run due to devaluation. The J-curve has been shown in the figure

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