Assume the model of simultaneous short$-$run equilibrium in output market and asset market under the floating exchange rate regime. How would you best describe the relationship between domestic currency exchange rate and output? Select one $-$ the most appropriate answer.

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When domestic currency depreciates it makes domestic goods and services less expensive compared to foreign goods and services bringing about the aggregate demand increase and consequently increase in output.

When domestic currency depreciates it makes domestic goods and services more expensive