When the dollar depreciates relative to foreign currencies,
A)a trade deficit results.
B)U.S. exports and imports become more expensive.
C)U.S. exports become cheaper and U.S. imports become more expensive.
D)the United States experiences a balance of payments deficit.

Question

Quizplus · Accepted Answer

When the dollar depreciates relative to foreign currencies, U.S. exports become cheaper and U.S. imports become more expensive. This is because foreign currencies can purchase more U.S. goods for the same amount of their own currency, making U.S. exports more attractive, while making foreign imports more expensive for U.S. consumers. This can lead to an improvement in the U.S. trade balance, as exports increase and imports decrease.

When the Dollar Depreciates Relative to Foreign Currencies