What are the implications of a depreciation of the dollar?
A)The dollar buys more foreign currency, and so it buys more foreign goods.
B)The dollar buys more foreign currency, and so it buys fewer foreign goods.
C)The dollar buys less foreign currency, and so it buys more foreign goods.
D)The dollar buys less foreign currency, and so it buys fewer foreign goods.

Question

Quizplus · Accepted Answer

When the dollar depreciates, it means its value decreases compared to foreign currencies. As a result, the dollar will buy less foreign currency, leading to an increase in the price of foreign goods. This makes buying foreign goods more expensive, so people will buy fewer foreign goods. Therefore, the best choice is D.

What Are the Implications of a Depreciation of the Dollar