Chapter 4: 5.3

5.3: Explain how exchange rates can affect a firm’s global sales.

If a country’s currency depreciates relative to the foreign company’s currency, the consumers will have to pay a higher price to buy the foreign goods. As their currency depreciates, the demand for imports declines. Conversely, as a country’s currency depreciates, their exports are sold much cheaper and thus increases demand for their products in markets where their currency is appreciating in comparison.