Question

When a country experiences a depreciation of its currency, it can expect which of these to happen?

a. imports to rise
b. exports to fall
c. balance of trade to worsen
d. balance of trade to improve

Answer 1

d. balance of trade to improve

Step-by-step explanation:

The balance of trade is the result of the total value of the exports of a country minus the total value of the imports. So, if a country experiences a depreciation of its currency, the local products will be cheaper for foreign markets as the local currency loses its value and this can result in an increase in the exports which will improve the balance of trade.

Answer 2

What we can expect to occur once a country encounters currency depreciation is that, the balance of trade would improve. Though in the downside, can weaken the economy, this could also be beneficial for the firms in the exportation of goods to other countries. The answer would be option D.