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 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.

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

Answer 1

The correct response is:

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

When the pound sterling depreciates, UK goods become cheaper for foreign buyers, which typically leads to an increase in exports. At the same time, imports become more expensive for consumers in the UK, which tends to decrease the volume of imports. As a result, the balance of trade (the difference between exports and imports) is likely to improve.