I'm reviewing a previous AP Macroeconomics exam and I saw the following question:
The United States and South Korea are trading partners, and the United States has a zero current account balance. Assume now that the inflation rate in the United States decreases relative to the inflation rate in South Korea.
Based on the decrease in the inflation rate in the United States, will United States exports to South Korea increase or decrease?
The answer is that US exports to South Korea will increase.
But my intuition says the opposite. If South Korea has high relative inflation, their currency will not be worth as much compared to the U.S. dollar, so it will depreciate. Thus, the South Korean currency cannot buy as much from the U.S. and will thus not be able to import as much, so I would think exports from the U.S. would decrease to South Korea. Why is my intuition wrong?