If the Australian dollar depreciates, what is the typical effect on net exports and the current account, assuming other factors constant?

If the Australian dollar depreciates, what is the typical effect on net exports and the current account, assuming other factors constant?

• A. Exports cheaper and imports more expensive; exports rise, imports fall; current account improves.
• B. Exports more expensive and imports cheaper; current account worsens.
• C. A weaker AUD makes exports cheaper and imports more expensive, supporting higher exports and lower imports, improving the current account.
• D. Depreciation has no effect on the current account; it only affects exchange rates.

Answer: (C)