Unit 4.6 · Balance of Payments
Marshall-Lerner Condition and J-Curve Effect (HL only)
AO2AO4HLDiagram required
Syllabus Requirement
Understanding the delayed response of the trade balance to currency depreciation and the role of PED in the effectiveness of devaluation.
Assessment Objectives
AO2Application and Analysis
AO4Use of Appropriate Skills
HLThis topic is assessed at Higher Level only.
Summary
The Marshall-Lerner condition and the J-curve effect explain how a country's current account balance responds to changes in exchange rates. Understanding these concepts is important for analyzing the impact of currency depreciation on trade balances over time.