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When the value of the dollar changes from 0.50 pounds to 0.75 pounds, the pound has appreciated and the dollar has depreciated.

a) true
b) false

User Glori
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1 Answer

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Final answer:

The statement is false because when 1 dollar is exchanged for more pounds than before, it indicates an appreciation of the dollar and depreciation of the pound, not the other way around.

Step-by-step explanation:

The statement that when the value of the dollar changes from 0.50 pounds to 0.75 pounds, the pound has appreciated and the dollar has depreciated is false. In this scenario, if the value of 1 dollar increases in terms of pounds, it means that the dollar has actually appreciated, because you now get more pounds for each dollar. Conversely, it implies that the pound has depreciated because it now takes more pounds to buy a single dollar.

Using the information provided, we understand that expected depreciation in a currency will generally lead investors to sell off that currency, increasing the supply and reducing the demand for that currency. As a result, the currency's value should decrease. For instance, if an international investor believes that the pound will buy fewer dollars in the future, they would expect the pound to depreciate. Similarly, if the British pound cost $2.00 in 2008 and then $1.27 in 2017, the pound has indeed gotten weaker or depreciated against the dollar, which in turn has appreciated versus the pound.

User Eric Haynes
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