Multiple choice

Match the following:

 
Group - I Group - II
1. J-curve effect (i) Sydney-Alexander
2. Indirect effect of money transfer (ii) Marshall-Lerner
3. Inter-commodity substitution (iii) Ohlin
4. Absorption approach (iv) Lipsey

  1. 1 - (ii), 2 - (iii), 3 - (iv), 4 - (i)

  2. 1 - (ii), 2 - (iv), 3 - (iii), 4 - (i)

  3. 1 - (i), 2 - (iii), 3 - (iv), 4 - (ii)

  4. 1 - (ii), 2 - (iii), 3 - (i), 4 - (iv)

  5. 1 - (iv), 2 - (iii), 3 - (ii), 4 - (i)
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A Correct answer
Explanation

These are correctly matched. J-curve effect is concerned with Marshall-Lerner. Devaluation makes the BOP worse in short-run and then, improves it in the long run. This traces a J-shaped curve through time and this is known as the J-curve effect of devaluation. Ohlin explains an indirect effect of money transfer. The debtor country repays its debts. With reduction in purchasing power, the demand for domestic goods and imports falls. 

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