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Question 49 1 pts Assume a country is running a trade deficit. According to economic theory how would a depreciation of that

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Answer #1

Statement - Assume a country is running a trade deficit. According to economic theory how would a depreciation of that country's currency affect its (negative) trade balance?

Answer - it would become less negative

Explanation -

Depreciation of a country's currency means that the currency of this country becomes cheaper as compared to the country it is pitted against. When the currency becomes cheaper, the goods and services produced in this country become cheaper as well. This generally results in a boost for the exports as these goods are relatively cheaper as compared to their competitors. Hence, the trade deficit might reduce to a certain extent.

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