J Curve

DEFINITION of 'J Curve'

A theory stating that a country's trade deficit will worsen initially after the depreciation of its currency because higher prices on foreign imports will be greater than the reduced volume of imports.

BREAKING DOWN 'J Curve'

The effects of the change in the price of exports compared to imports will eventually induce an expansion of exports and a cut in imports--which, in turn, will improve the balance of payments.

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    Learn the meanings of the macroeconomic terms current account deficit and trade deficit, and understand the differences between ... Read Answer >>
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    Understand the reasons why trade deficits, reviled by many economic analysts, are not always a bad thing in the eyes of many ... Read Answer >>
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    Learn in what year the United States ran its largest negative balance of trade as a result of imports greatly exceeding the ... Read Answer >>
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