Currency Depreciation Boosts Export Competitiveness

Steps:

• A fall in the foreign exchange rate means the domestic currency depreciates against foreign currencies.
• Depreciation lowers the price of domestic goods in foreign markets, benefiting export industries like fishing.
• For tourism, foreign visitors face higher costs in their currency, potentially reducing inflows.
• Overall, exports become more attractive, while imports grow costlier for locals.

Why B is correct:

• Currency depreciation reduces the foreign-currency price of exports, per the exchange rate definition where 1 unit of domestic currency buys fewer foreign units, making fish cheaper abroad.

Why the others are wrong:

• A: Depreciation raises import prices, so locals buy fewer imported goods.
• C: Lower export prices typically increase export volume via improved competitiveness.
• D: Higher costs for tourists in their currency would discourage visits, but the effect aligns with reduced tourism, not the primary export impact.

Final answer: B