ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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British dishes will become cheaper in the United States.
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American wheat will become cheaper in Great Britain.
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British dishes will become more expensive in the United States.
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no change will occur
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Detailed explanation-1: -it will take fewer dollars to purchase a pound. It the U.S. dollar appreciates, the relative value of the British pound will be decreased with respect to the value of U.S. dollars, so it will be required lesser amount of dollar to purchase same amount of British pound.
Detailed explanation-2: -If the dollar appreciates (the exchange rate increases), the relative price of domestic goods and services increases while the relative price of foreign goods and services falls. 1. The change in relative prices will decrease U.S. exports and increase its imports.
Detailed explanation-3: -When a country’s exchange rate increases relative to another country’s, the price of its goods and services increases. Imports become cheaper.
Detailed explanation-4: -Effects of Currency Appreciation Export costs rise: If the U.S. dollar appreciates, foreigners will find American goods more expensive because they have to spend more for those goods in USD. That means that with the higher price, the number of U.S. goods being exported will likely drop.