How does a decrease in value of a country's currency relative to other currencies affect its balance of trade?
A)A decrease in value of a country's currency relative to other currencies raises imports,reduces exports,and reduces the balance of trade.
B)A decrease in value of a country's currency relative to other currencies reduces imports,raises exports,and reduces the balance of trade.
C)A decrease in value of a country's currency relative to other currencies reduces imports,raises exports,and increases the balance of trade.
D)A decrease in value of a country's currency relative to other currencies raises imports,reduces exports,and increases the balance of trade.

Question

Quizplus · Accepted Answer

A decrease in the value of a country's currency makes its goods cheaper for foreign buyers, thus increasing exports. It also makes foreign goods more expensive for domestic consumers, thus reducing imports. This combination can improve the country's balance of trade.

How Does a Decrease in Value of a Country's Currency