What happens when a nation’s currency depreciates?

Its trade decreases.

Its products become more expensive to other nations.

Its products become cheaper to other nations.

Its trade increases.

1 answer

When a nation's currency depreciates, it generally makes its products cheaper to other nations. This often leads to an increase in exports because foreign buyers can purchase more of the nation’s goods and services for a lower price. Conversely, imports may become more expensive, which can decrease the volume of imports. Therefore, the correct statements in this context would be:

  • Its products become cheaper to other nations.
  • Its trade increases (primarily in relation to exports).