How does depreciation of dollar increases exports?

Question

Can anyone please explain this concept to me?

And why does appreciation of dollar increases imports?

What does it mean when they say the supply of dollar decreases as export increases? Please explain to me the whole point... thank you!

Answer 1

When you talk about a currency, you are really talking about purchasing power.  

When the value of the dollar depreciates in comparison to a different currency, say the Euro, the purchasing power of the Euro increases for imports priced in dollars.

When the purchasing power of the Euro increases, the quantity of goods (that are priced in dollars) that can be purchased goes up.  

In other words, the imports become cheaper, and when the price of a good goes down, the quantity purchased will go up, and exports increase.

Answer 2

it increases exports because our dollar isn't worth as much. example if a bottle of drink cost $1 in america and our $ is worth 50 cents compeard to americas $ then it will cost us $2 because our $ is only worth half of there's. there fore costing us double but costing them half as much. there fore they get double for half as much. so they buy more whilist it is cheap for them and less when our dollar is dearer because then they don't get as much for there dollar.

Hope this helps you

and not confusse you more

good luck

Answer 3

When the dollar depreciates, it drops in value compared to the currency of it's trading partners. This makes the dollar cheaper and thus goods made in USA priced in dollars are cheaper from the viewpoint of these trading partners.

For example a few years ago, 1 euro = 1 dollar, that means a european consumer with 1000 euro could import 1000 dollars worth of american goods, thus raising american exports by 1000 dollars.

Now 1 euro = 1½ dollar. That means the same european consumer with 1000 euro can now import 1500 dollars worth of american goods, thus raising american exports by 1500 dollars.

Vice-versa if the dollar appreciates.