Question : The domestic country will have to spend more domestic currency to import foreign goods. Which effect of depreciation is highlighted here?
Option 1: Increase in exports
Option 2: Decrease in imports
Option 3: Increase in the national income
Option 4: All of the above.
Correct Answer: Decrease in imports
Solution : Depreciation of a domestic currency means a fall in the price of domestic currency in terms of foreign currency, where more amount of money has to be spend to import goods. Hence Option B is correct.
Question : The domestic country will have to spend less domestic currency to import foreign goods. Which effect of depreciation is highlighted here?
Question : It means with same amount of dollar more goods can be purchased from domestic country. Which effect of depreciation is highlighted here?
Question : Net exports will decrease. Which effect of depreciation is highlighted here?
Question : Net exports will increase. Which effect of depreciation is highlighted here?
Question : What is the impact of a stronger domestic currency on a country's imports and exports?
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