Economics (AS & A Level) · May / June 2023 · Paper 32 · Question 28

The diagram shows a J curve which indicates that a fall in the exchange rate will worsen the current account position before it starts to improve. What is said to explain this?

1. Aa time lag before recognising that prices have changed
2. Ban improvement in the quality of goods produced
3. Cthe demand for imports and exports is elastic in the short run
4. Dthe supply of goods is price elastic

As printed in the paper