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Chapter 18: Q. 3 (page 495)

When the U.S. dollar depreciates, what happens to exports and imports in the United States?

Short Answer

Expert verified

When the U. S dollar depreciates the exports will increase and imports will fall.

Step by step solution

01

Concept Introduction

Whenever the US dollar devalues, it implies that its worth has diminished compared with different monetary standards.

02

Explanation

On the off chance that the US dollar devalues, unfamiliar merchandise requested by US residents will become costly. Taking illustration of US dollar and euro, prior 1 US dollar could purchase 1 euro worth of products. In any case, presently we want 1.25 dollars to get 1 euro worth of products. So fundamentally it is like the Price of unfamiliar products have expanded.

As per the regulation of interest, when cost increments, the amount requested diminishes.

Accordingly, US residents will request less unfamiliar products. Thus imports will fall.

To foreign residents, in any case, US products have become less expensive. Since prior they used to pay 1 euro for 1 dollar worth of merchandise, yet not they just need to pay 0.8 for a similar sum. Consequently, when costs decline, the amount requested should increment. Accordingly, unfamiliar residents will request a greater amount of US great. Accordingly, commodities will increment.

03

Final Answer 

When the U. S dollar depreciates the exports will increase and imports will fall.

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