Question

Which of the following will result from the depreciation of the US dollar relative to other currencies?

a) Increased exports
b) Reduced imports
c) Trade surplus
d) Trade deficit

Answer 1

d) Trade deficit When the US dollar depreciates, it leads to increased exports, reduced imports, and a trade deficit.

Step-by-step explanation:

When the US dollar depreciates relative to other currencies, it means that the value of the dollar decreases compared to other currencies. This has several effects on international trade:

1. Increased exports: A weaker US dollar makes US products cheaper for foreign buyers, which makes them more attractive. This can lead to an increase in exports as foreign buyers take advantage of the lower prices.
2. Reduced imports: On the other hand, a weaker US dollar makes imported goods more expensive for US consumers. This can lead to a decrease in imports as consumers are less willing to pay the higher prices.
3. Trade deficit: A trade deficit occurs when a country's imports exceed its exports. Since a weaker US dollar can lead to reduced imports and increased exports, it is likely to result in a trade deficit.

Therefore, the correct answer is: d) Trade deficit.