General Securities Representative (Series 7) Practice Exam

When the US dollar loses value, what happens to exports?

1. They become less competitive

2. They remain unaffected

3. They become more competitive

4. They increase in price

The correct answer is: They become more competitive

When the US dollar loses value, it becomes weaker compared to foreign currencies. This depreciation of the dollar has a significant impact on exports. As the dollar weakens, American goods and services become less expensive for foreign buyers. For instance, if a product costs $100 in the United States, with a weaker dollar, that same product could be perceived as costing less in the foreign currency, making it more attractive to international consumers. This increased affordability makes US exports more competitive in the global market, as foreign buyers are more likely to purchase American goods when they are getting more value for their currency. Consequently, this can lead to an increase in sales of US exports, boosting the overall competitiveness of American products abroad. In summary, a weaker US dollar enhances the competitiveness of exports by making them cheaper for foreign buyers, driving demand for those goods and services in international markets.