Assume that U.S.imports are contracted in foreign currency and the U.S.exports are
Contracted in domestic currency.If the dollar is devalued,then the balance of trade will:
A) Become more negative
B) Become more positive
C) Stay the same
D) Not possible to answer with the given information

Question

Quizplus · Accepted Answer

If the dollar is devalued, it means that it will take more dollars to purchase the same amount of foreign currency. Therefore, imports become more expensive for the U.S. while exports become relatively cheaper for foreign countries. As a result, U.S. imports will decrease (or potentially stay the same if they are necessities) and U.S. exports will increase. This will lead to a more negative balance of trade.

Assume That U