Question 8
If the exchange rate value of the dollar depreciates relative to other currencies, we would expect
(1) aggregate demand in the United States to decrease.
(2) U.S. exports to increase.
(3) U.S. exports to decrease.
(4) U.S. imports to increase.

When the dollar depreciates, it essentially makes U.S. goods and services cheaper for foreign buyers, which typically results in an uptick in U.S. exports. This is because other countries find U.S. products more affordable, leading more consumers and businesses abroad to purchase them.

On the flip side, a weaker dollar can make imported goods pricier for American consumers, leading to a decrease in imports. This creates a favorable trade balance and is often a strategic move to boost domestic production as people begin to turn to local alternatives for goods they can no longer afford from abroad.