The possibility that after a shock to the economy, some variables will move further in the short run than it is necessary for them to adjust in the long run. This occurs because of differences in speeds of adjustment. Suppose, for example, that after some shock it is necessary in the long run for a country's exchange rate to be 5 per cent lower than before. Some trade flows adjust only slowly in response to exchange rate changes, so that it may be necessary in the short run for the exchange rate to fall by more than 5 per cent. This is partly to produce larger changes in those parts of trade which can adjust promptly. Once the sectors which adjust slowly do react, the exchange rate can rise again to its long-run equilibrium level. The prospect of gains on their loans when the exchange rate recovers may also help to induce foreign lenders to finance a temporary deficit.

• consumer debt
• consumer durables
• consumer expenditure
• consumer goods
• consumerism
• consumer non-durables
• consumer price index
• consumer protection
• consumer rationality
• consumer sovereignty
• consumer surplus
• consumption
• consumption externality
• consumption function
• consumption goods
• consumption possibility line
• contagion
• content, local
• contestable market
• contingent fee
• contingent liability
• contingent market
• contingent protection
• continuity
• continuous compounding