Fluctuations in the exchange rate have little influence on the balance of trade.

Question

Quizplus · Accepted Answer

Fluctuations in the exchange rate can have a significant impact on the balance of trade. When a country's currency depreciates, its exports become cheaper and more attractive to foreign buyers, leading to an increase in exports and a decrease in imports. On the other hand, when a country's currency appreciates, its exports become more expensive and less attractive to foreign buyers, leading to a decrease in exports and an increase in imports. These changes in trade can have a significant impact on the balance of trade.

Fluctuations in the Exchange Rate Have Little Influence on the Balance