The J-Curve effect in international economics illustrates that after currency devaluation, a country’s trade balance initially:

ADeteriorates in the short run before improving in the long run

BImproves immediately, then deteriorates

CRemains unchanged indefinitely

DCauses immediate capital flight

Explanation

Because import/export volumes take time to adjust, devaluation worsens trade deficits initially before price elasticity improves the balance.

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