ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the mark has appreciated and German cars sold in the United States become more expensive.
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the mark has appreciated and German cars sold in the United States become less expensive.
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the mark has depreciated and American wheat sold in Germany becomes more expensive.
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the mark has depreciated and American wheat sold in Germany becomes less expensive.
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Detailed explanation-1: -an increase in the dollar price of euros. If the price of a euro (the European currency) increases from $1.00 to $1.10, then, everything else held constant, a European vacation becomes more expensive.
Detailed explanation-2: -$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-3: -depreciated; appreciated. When the value of the dollar changes from 0.5 pounds to 0.75 pounds, it implies that one has to spend more amount of pounds to purchase the same amount of dollars. Hence, we can say that the British pound has depreciated and the U.S. dollar has appreciated.
Detailed explanation-4: -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.