Question

Everything else held constant, when a country's currency depreciates, its goods abroad become ________ expensive while foreign goods in that country become ________ expensive. Question 31 options: A) less; less B) more; less C) less; more D) more; more

Answer 1

Answer:

C) less; more

Explanation:

Depreciation of a country makes it less expensive in the foreign exchange market. Importers will acquire a depreciated currency using less quantity of their nation's currency. A depreciated currency makes exports cheaper because the exchange rate for that currency will be lower. Goods and services imported from a country with a depreciated country will be cheaper in the local markets.

A nation with a depreciated currency tends to have import trade in its markets expensively. Traders use more units of the local currency to import.  Consequently, the imported goods will be more expensive.