# ECONOMICS (CBSE/UGC NET)

## ECONOMICS

### FOREIGN CURRENCY MARKETS

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
When the exchange rate for the Mexican peso changes from 9 pesos to the dollar to 10 pesos to the dollar, then
 A the peso has appreciated and the dollar has appreciated. B the peso has depreciated and the dollar has appreciated. C the peso has appreciated and the dollar has depreciated. D the peso has depreciated and the dollar has depreciated.
Explanation:

Detailed explanation-1: -If the exchange rate for the Mexican peso changes from 9 Pesos to the U.S. dollar to 10 pesos to the U.S. dollar, we can infer that the Mexica peso has depreciated as one will have to shell out more Mexican pesos for the same U.S. dollars.

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: -The correct answer to the given question is option d) less expensive; rises. When the U.S. dollar appreciates against the Mexican peso, it can be inferred that the Mexican peso depreciates against the U.S. dollar. In other words, the peso becomes less expensive or of less value and hence the U.S exchange rate rises.

Detailed explanation-4: -Latest Currency Exchange Rates: 1 Mexican Peso = 0.0544 US Dollar.

Detailed explanation-5: -In general, when a currency loses value, people’s purchasing power declines as well because products-especially imported ones-cost more money. And when that causes a general rise in prices, it’s called inflation.

There is 1 question to complete.