J-Curve | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)

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  • Normally, when your currency depreciates
  • exports increase and imports fall so balance of payments improves
  • However,
  • The J-curve shows that, when your currency depreciates
  • the balance of payments worsens.
  • This is because exports and imports are inelastic at first and they take time to adjust - even if exchange rates change.