Answer:
D) decrease; increase
Explanation:
Monetary appreciations and devaluations are common situations of capitalism in which countries use floating exchange rates. Basically, the exchange corresponds to the amount a currency can buy from another country's currency. When the dollar depreciates, it means that it would take more dollars to buy another currency, such as the Euro. Thus, the undervalued dollar is a stimulus for other countries to buy American products, as their money is worth more than the dollar. Therefore, exports will increase.
In contrast, in relation to the domestic market, the devaluation of the dollar tends to decrease the demand for the product. This is because with the depreciation of the dollar, the imported inputs for manufacturing production become more expensive, because it will take more dollars to buy the inputs. This cost increase is passed to the final price of the product. When price increases, the tendency is for demand to decrease.
Even in the case of products that do not use imported inputs in the production process, dollar depreciation will cause demand to decrease. This is because from the producer's point of view, it will be more profitable to produce for the foreign market, since the devaluation of the dollar makes American products become more competitive in the international market. This will have repercussions in the domestic market, since a smaller amount of the good will be supplied internally, which tends to raise prices. Faced with rising prices, demand tends to decrease.
