What is a typical consequence of a depreciation in currency in the short term?

A depreciation in currency in the short term typically leads to an increase in the cost of imports and a decrease in the cost of exports. This change can negatively impact the current account balance, particularly if a country is reliant on importing goods that have become more expensive due to the depreciation. Consumers and businesses may find imported products or components costlier, which may not immediately change their consumption patterns or production processes. Consequently, the increased expense can lead to a worsening of the current account deficit as the value of imports rises faster than that of exports, at least in the early stages following a currency depreciation.

The option indicating an immediate surplus in the current account does not accurately reflect the initial impact of depreciation, as exports typically take time to react to price changes in the global market. Similarly, the idea that trade barriers would increase is not a direct consequence of depreciation; such measures are usually determined by policy choices rather than currency fluctuations. Lastly, stability in import prices contradicts the logic of a currency depreciation, as it inherently results in higher prices for imports. Thus, the correct understanding of currency depreciation indicates an initial worsening of the current account deficit as the market adjusts.