What happens when the dollar depreciates?

The most obvious effects of dollar depreciation on the GDP accounts are evident in the impacts on net exports, GDP, and prices. Current-dollar GDP: When the dollar depreciates against major foreign currencies, one generally expects to see current-dollar exports increase, as U.S. produced goods become cheaper abroad

Exchange Rates and the International Price of Goods

1. Movements in exchange rates alter the international price of goods and services.
a. If the dollar depreciates (the exchange rate falls), the relative price of domestic goods and services falls while the relative price of foreign goods and services increases.

1. The change in relative prices will increase U.S. exports and decrease its imports.
b. If the dollar appreciates (the exchange rate increases), the relative price of domestic goods and services increases while the relative price of foreign goods and services falls.

1. The change in relative prices will decrease U.S. exports and increase its imports.