CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

According to the J-curve concept, which of the following is false? The effects of a currency depreciation on the balance of payments are ______
A. transmitted primarily via the income-adjusted mechanism.
B. likely to be adverse or negative in the short run.
C. in the long run positive, given favorable elasticity conditions.
Explanation: The J-curve effect shows that currency devaluation or depreciation will initially make the trade balance worse before making it better.

User Contributed Comments 5

User Comment
langy help!?
alexchav So B should be correct, right? In the short run, devaluation deteriorates the trade balance!
Sheeb That was my thinking too. B is a true statement but the question asks for a false one.
sevywonder I've gotten this one as it's been recycled, but there will definitely be questions like this on the test. Read the question, then read it again...
sumeetb @Sevywonder can you please provide an explanation?
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