Question

exchange rate and purchasing power quick check
if the united kingdoms pound sterling is depreciating with respect to currencies in the rest of the world, which of the following correctly explains the resulting impact on the united kingdoms balance of trade? (1 point)
the united kingdom will likely import more goods, increasing its balance of trade with the rest of the world.
the united kingdom will likely export more goods, decreasing its balance of trade with the rest of the world.
the united kingdom will likely import more goods, decreasing its balance of trade with the rest of the world.
the united kingdom will likely export more goods, increasing its balance of trade with the rest of the world

Explanation:

When a currency (pound sterling here) depreciates, UK - made goods become cheaper for foreign buyers (since they need to exchange less of their currency to get pounds to buy UK goods). This increases UK's exports. Imports become more expensive (as UK needs more pounds to buy foreign - priced goods in their currency), so imports tend to decrease. An increase in exports and a decrease in imports leads to an increase in the balance of trade (balance of trade = exports - imports). So the UK will likely export more goods, increasing its balance of trade with the rest of the world.

Answer:

The United Kingdom will likely export more goods, increasing its balance of trade with the rest of the world