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

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Appeared in Year: 2018

Essay Question▾

Describe in Detail

With respect to devaluation, explain the J curve effect.

Explanation

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 belo

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