Question

When the Mexican government changes the fixed exchange rate of the peso relative to the U.S. dollar from 1.5 (pesos/U.S. dollar) to 3.0 (pesos/U.S. dollar), the peso is ________. When the foreign exchange market changes the equilibrium exchange rate of the euro relative to the U.S. dollar from 1.15 (U.S. dollars/euro) to 1.30 (U.S. dollars/euro), the euro is ________.

a. Revaluated; appreciatedb. Appreciated; devaluatedc. Devaluated; depreciatedd. Appreciated; revaluatede. Devaluated; appreciated

Answer 1

The answer is: E) devaluated; appreciated

Step-by-step explanation:

A currency devaluation happens when a country´s currency is deliberately adjusted downward to make it lose value relative to another currency. If this downward adjustment happens in the foreign exchange market and is not deliberately done by a government, is called currency depreciation.

A currency revaluation happens when a government deliberately adjusts the value of its currency upwards to make it gain value relative to another currency. When this upward adjustment happens in a foreign exchange market and is not deliberately done by a government, is called currency appreciation.