Which of the following is NOT likely to occur in the quantity adjustment phase of the J-Curve adjustment path?
A) Imports become relatively more expensive.
B) Exports become relatively less expensive.
C) The balance of trade gets worse.
D) All of the above are true.

Question

Quizplus · Accepted Answer

The quantity adjustment phase of the J-Curve adjustment path is the period during which the volume of trade adjusts in response to the price changes caused by the currency depreciation. As a result, imports become relatively more expensive, and exports become relatively less expensive, which leads to an increase in exports and a decrease in imports. However, this should result in an improvement in the balance of trade, rather than a worsening of it. Therefore, option C is NOT likely to occur. Options A and B are true statements that are likely to occur in the quantity adjustment phase.

Which of the Following Is NOT Likely to Occur in the Quantity