As the value of a country's currency falls, its balance of trade should
A) decline.
B) remain the same.
C) improve.
D) either increase or decrease.
E) none of these.

Question

Quizplus · Accepted Answer

When a country's currency falls, its exports become less expensive to foreign buyers, which can lead to an increase in demand for those exports. This can lead to an improvement in the country's balance of trade, as more goods and services are being sold abroad. At the same time, imports become more expensive, which can encourage domestic consumers to buy more domestically produced goods and services, further improving the balance of trade.

As the Value of a Country's Currency Falls, Its Balance