CAF-7 · Chapter 1 · Question 7 of 15
If the national currency of a country depreciates significantly against the US Dollar, what will be the primary effect on that country's international trade?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Imports will become more expensive, and exports will become cheaper for foreign buyers
Explanation
When a domestic currency depreciates, it takes more domestic currency to buy foreign goods (imports become expensive), but foreign buyers need less of their currency to buy domestic goods (exports become cheaper and more competitive).
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