Which of the following statements is true if the exchange rate depreciates?
A) exports will fall
B) imports will rise
C) GDP will increase
D) the price level will fall
E) GDP will be unaffected.

Question

Quizplus · Accepted Answer

When the exchange rate depreciates, it means the domestic currency has lost value relative to foreign currencies. This makes domestic goods and services cheaper for foreign buyers, potentially increasing exports. As exports are a component of GDP, an increase in exports can lead to an increase in GDP.

Which of the Following Statements Is True If the Exchange