If the United Kingdom's pound sterling is depreciating with respect to currencies in the rest of the world, which of the following correctly explains the resulting impact on the United Kingdom's balance of trade?(1 point)

Question

Responses

The United Kingdom will likely import more goods, increasing its balance of trade with the rest of the world.
The United Kingdom will likely import more goods, increasing its balance of trade with the rest of the world.

The United Kingdom will likely export more goods, increasing its balance of trade with the rest of the world
The United Kingdom will likely export more goods, increasing its balance of trade with the rest of the world

The United Kingdom will likely export more goods, decreasing its balance of trade with the rest of the world.
The United Kingdom will likely export more goods, decreasing its balance of trade with the rest of the world.

The United Kingdom will likely import more goods, decreasing its balance of trade with the rest of the world.
The United Kingdom will likely import more goods, decreasing its balance of trade with the rest of the world.

Answer 1

When the United Kingdom's pound sterling depreciates, it means that the currency has become weaker compared to other currencies. This typically has the following effects on trade:

1. Exports become cheaper for foreign buyers: As the value of the pound decreases, British goods become less expensive for buyers in other countries. This can lead to an increase in exports.

2. Imports become more expensive for UK consumers: Conversely, imported goods will become more expensive for consumers and businesses in the UK, which may lead to a decrease in imports.

Given these effects, the balance of trade (which is the difference between exports and imports) is likely to improve, as exports increase and imports decrease.

Thus, the correct response is:

The United Kingdom will likely export more goods, increasing its balance of trade with the rest of the world.