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A-Level Economics · J-curve diagram question

Which point is the TROUGH — the deepest the deficit gets?

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The diagram

The answer

Point B. T₁, point B: dearer imports on barely-changed volumes have done their worst. From here contracts roll off and the balance climbs. The trough is the bottom of the J — point B, at time T₁. Point A is where the depreciation happens, and the crucial exam point is that the deficit deepens AFTER it. That lag is the whole reason the diagram exists.

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This is one of 6 questions on the j-curve diagram — every corner lettered, every wrong answer diagnosed.

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