When the value of a country's currency declines,the price of its ________.
A) exports and imports on world markets declines
B) exports and imports on world markets increases
C) exports on world markets declines and the price of its imports increases
D) exports on world markets increases and the price of its imports declines

Question

Quizplus · Accepted Answer

When the value of a country's currency declines, its exports become cheaper for foreign buyers and thus more competitive on world markets. However, the price of its imports increases since it takes more units of the domestic currency to purchase the same amount of foreign currency needed to buy imports. As a result, the country's export revenue may increase, but its import demand may decrease or become more expensive, which can have an impact on its trade balance and overall economy.

When the Value of a Country's Currency Declines,the Price of Its