Why would a currency depreciation leads to an improvement in a nations balance of trade?

Question

I am not to sure I am understand this one, can anyone help?

Answer 1

I'm sure you already understand about it...

I'm just going to add a little detail from the previous answers..      

There's a condition in order currency depreciation leads to improvement in trade balance..

It's called Marshall-Lerner Condition, which stated that for a currency devaluation (or depreciation) to have a positive impact in trade balance, the sum of price elasticity of exports and imports (in absolute value) must be greater than 1. It means that If goods exported are elastic to price, their quantity demanded will increase proportionately more than the decrease in price, and total export revenue will increase. Similarly, if goods imported are elastic, total import expenditure will decrease. Both will improve the trade balance.

Answer 2

Because in this case domestic currency will be able to purchase less foreign goods and services - so it will lead to fall in imports. Another point is - foreigners will be able to purchase relatively more your goods and services for their money (your goods/services will become cheaper for them) - so it will lead to increase in your country export.

Since balance of trade is Export-Import then increasing in export and fall in import will lead to improvement of balance of trade.

Answer 3

Allowing your currency to depreciate makes your exports cheaper to other countries.  European's are now buying more American goods because they're cheap to them.  8 years ago the Euro was 1:1 with the dollar now its more than 1.5:1 so it's like everything is on sale.  Just like the Chinese government keeping their currency between 7 and 8 to the dollar has kept their imports cheap for us to buy.  

The flip side is we can now afford less European goods, but that also improves are trade balance, they buy more of ours we buy less of their's.