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Answer True, False, or uncertain and briefly explain your reasoning. "A depreciation of the (real) exchange...

Answer True, False, or uncertain and briefly explain your reasoning. "A depreciation of the (real) exchange rate always increases net exports."

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A depreciation of the real exchange rate always increases net exports. This is true. The reason for this is that when the value of a country's currency falls the price of foreign currency goes up. This makes it difficult to obtain foreign goods as payment in foreign currency is costly. This means decrease in imports. This also means a rise in exports as the value of the country's currency falls and allows for sale of goods at lower prices with respect to the foreign currency.

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