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Suppose that the yen/pound exchange rate on 1/1/2016 was 130/pound. One month later, the rate was 135/pound. If the J-curve theory holds, which of the
Suppose that the yen/pound exchange rate on 1/1/2016 was 130/pound. One month later, the rate was 135/pound. If the J-curve theory holds, which of the following situations would occur, all else being equal?
a. Japan's balance of trade would worsen, and then gradually improve.
b. The UK's balance of trade would worsen, and then gradually improve.
c. The balance of trade for both nations would remain constant.
d. Cannot be determined based on the information given.
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