ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It has risen
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It has fallen
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Either A or B
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None of the above
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Detailed explanation-1: -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.
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: -When the value of the British pound changes from $1.50 to $1.25, then. the pound has appreciated and the dollar has appreciated. the pound has depreciated and the dollar has appreciated.
Detailed explanation-4: -To calculate the percentage discrepancy, take the difference between the two exchange rates, and divide it by the market exchange rate: 1.37-1.33 = 0.04/1.33 = 0.03. Multiply by 100 to get the percentage markup: 0.03 x 100 = 3%.