ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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In April 2000, one U.S. dollar traded on the foreign exchange market for about 7.2 French francs. Therefore, one French franc would have purchased about
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4.10 U.S. dollars.
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1.40 U.S. dollars.
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0.41 U.S. dollars.
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0.14 U.S. dollars.
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Explanation:
Detailed explanation-1: -$1/€1 → $1.20/€1 means that the dollar has depreciated relative to the euro. It now takes $1.20 to buy one euro, so that the dollar is less valuable. The euro has appreciated relative to the dollar: it is now more valuable.
Detailed explanation-2: -The correct answer is option C) appreciated; depreciated. If the value of 1 British pound changes from $1.25 to $1.50, one will have to spend more amount of U.S. dollars to purchase the same amount of British pound. Hence, we can conclude that the U.S. dollar will depreciate and the British pound will appreciate.
There is 1 question to complete.