Question

What does a depreciation of the exchange rate (say US dollar) mean? What does that mean for US exports?

a) A depreciation means the US dollar becomes weaker relative to other currencies.
b) A depreciation means the US dollar becomes stronger relative to other currencies.
c) A depreciation has no impact on US exports.
d) A depreciation leads to an increase in US exports.

Answer 1

a) A depreciation means the US dollar becomes weaker relative to other currencies. A depreciation of the exchange rate means that the US dollar becomes weaker in relation to other currencies. This leads to an increase in US exports.

Step-by-step explanation:

A depreciation of the exchange rate means that the value of a currency, such as the US dollar, decreases in relation to other currencies. In other words, the US dollar becomes weaker compared to other currencies.

This depreciation has an impact on US exports. When the US dollar depreciates, it means that foreign currencies become stronger in relation to the US dollar. This makes US goods and services relatively cheaper for foreign buyers. As a result, a depreciation of the US dollar leads to an increase in US exports, as foreign consumers will be able to afford more US products.