The Hysteresis Effect Suggests That After a Long and Persistent

Multiple Choice

The hysteresis effect suggests that after a long and persistent overvaluation of the U.S.dollar

A) foreign central banks are likely to intervene in the foreign exchange market in an effort to depreciate the dollar again
B) there will be a change in trade patterns that will last even after the value of the dollar has come down
C) foreign firms will initially gain market shares from U.S. firms but will lose them as soon as the dollar starts to depreciate again
D) a depreciation of the dollar will initially lower net exports but the trend will soon reverse and the trade balance will ultimately improve
E) none of the above