Currency Depreciation Boosts Export Competitiveness

Steps:

• A fall in foreign exchange rate means the country's currency depreciates against others.
• Depreciation lowers the price of domestic goods in foreign currencies.
• Foreign buyers find these goods cheaper, increasing demand for exports.
• This makes the country's exports more competitive internationally.

Why D is correct:

• By definition, depreciation reduces the relative price of exports abroad, enhancing their competitiveness per the exchange rate's impact on trade balances.

Why the others are wrong:

• A: Money supply is unaffected directly by exchange rates; it's controlled by central banks.
• B: Purchasing power decreases for imported goods due to higher domestic costs.
• C: Imports become more expensive as foreign goods cost more in depreciated currency.

Final answer: D