J CURVE: An interesting relationship that exists between the exchange rate for a nation's currency and its balance of trade. In principle, the drop in a nation's exchange rate, or price of currency, makes the currency less expensive to "buy." With "cheaper" currency the price of domestic production is less and the price of foreign stuff is more, causing an increase in exports to other countries and drop in imports coming in from foreign producers. The economy thus moves in the direction away from a trade deficit and toward a trade surplus. However, the first few months after a drop in the exchange rate the balance of trade goes in the other direction, with any existing trade deficit increasing or any trade surplus shrinking. This occurs because the quantities imported and exported don't change in the short run, but the prices do. Because more is paid for the same amount of imported goods and receive less for the same amount of exports, total spending on imports increases, total revenue received from exports declines, and the movement is in the trade deficit direction. Once those quantities start adjusting in the long run, then we see a movement in the direction of a trade surplus.

     See also | foreign trade | foreign exchange | depreciation | exchange rate | currency | balance of trade | domestic | foreign | export | import | net exports | trade deficit | trade surplus | short run | long run |

J CURVE, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: April 3, 2025].

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Household consumption expenditures that depend on income or production (especially disposable income, national income, or even gross domestic product). That is, changes in income induce changes in consumption. Induced consumption captures the fundamental psychological law put forth by John Maynard Keynes. It is measured by the marginal propensity to consume (MPC) and is reflected by the positive slope of consumption line. The alternative to induced consumption is autonomous consumption, which does not depend on income.

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Today, you are likely to spend a great deal of time wandering around the downtown area trying to buy either a how-to book on fine dining or a coffee cup commemorating the first day of winter. Be on the lookout for door-to-door salesmen.
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