When the value of the domestic currency depreciates, domestic goods become less expensive relative to foreign goods, making domestic goods more attractive to domestic and foreign consumers.
The demand curve for dollars in the foreign-currency exchange market shows the relationship between the exchange rate and the quantity of dollars that would be demanded.
There is a negative relationship between the exchange rate and the amount of dollars demanded. This is why the demand curve is downward sloping.
Here are the options of this question:
A. A depreciation in the domestic currency causes exports to fall and imports to rise and, therefore, net exports to fall.
B. A depreciation of the dollar reduces the quantity of dollars demanded in the market for foreign-currency exchange.
C. When the value of the domestic currency depreciates, domestic goods become less expensive relative to foreign goods, making domestic goods more attractive to domestic and foreign consumers.
D. Net capital outflow equals net exports.
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