Answer (C) is correct . When the U.S. dollar depreciates, U.S. products become cheaper to foreign consumers. A?depreciated dollar acts as a subsidy to exports by decreasing their price. The opposite is true for imports. When the dollar depreciates (loses purchasing power), imports become more costly. Thus, a depreciated U.S. dollar increases the prices of imported goods.
Answer (A) is incorrect because Import prices will increase because the U.S. dollar purchases less of the foreign currency equivalent.
Answer (B) is incorrect because An appreciated dollar would result in a decrease of import prices and an increase in export prices.
Answer (D) is incorrect because A depreciated dollar will decrease the price of export because they become cheaper in the foreign market.
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