The effect of a depreciation of the domestic currency on the trade balance is likely to | Faculties

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Shiva Ram

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📊 International Financial Management

Q. The effect of a depreciation of the domestic currency on the trade balance is likely to

(A) increase it in the short and long runs.
(B) decrease it in the short run and increase it in the long run.
(C) decrease it in the short and long runs.
(D) increase it in the short run and decrease it in the long run.

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✅ Correct Answer: (B) decrease it in the short run and increase it in the long run.

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