Appreciation/Depreciation

1. Under a floating exchange rate system, if demand for a currency increases relative to supply, the likely result is:

• Depreciation of the currency

• Appreciation of the currency

• No change in the exchange rate

• A fixed exchange rate

2. Which of the following will cause a currency to appreciate under a floating exchange rate system? Multiple correct!

• Lower interest rates in the foreign country

• Higher inflation in the home country

• An increase in supply of the currency

• An increase in demand for the currency

3. If the Indian rupee appreciates against the US dollar, which of the following is true?

• Indian goods will become more expensive for Americans to buy

• Indian goods will become cheaper for Americans to buy

• Demand for Indian exports will rise

• Supply of Indian currency has fallen

7. Depreciation of a currency can help correct a current account deficit because it:

• Discourages imports and encourages exports

• Reduces the incentive to save

• Lowers the price of foreign currencies

• Raises domestic interest rates

1. If a country has high inflation relative to its trading partners, this will most likely lead to:

• No change in the exchange rate

• Appreciation of its currency

• Depreciation of its currency

• Uncertain with information provided

3. An increase in a country's interest rates relative to other countries will likely lead to:

• Higher inflation

• Lower unemployment

• Depreciation of the currency

• Appreciation of the currency

Widgets produced in Andrewtopia become very popular, what is most likely to happen? (Andrewtopia uses the Andrew Craig Dollar, AC$)

• CNY will appreciate and AC$ will appreciate

• CNY will depreciate and AC$ will depreciate

• CNY will appreciate and AC$ will depreciate

• CNY will depreciate and AC$ will appreciate

If the government of Andrewtopia (currency AC$) removes tariffs place on Chinese (Currency CNY) goods we would expect:

(Multiple correct)

• Demand for AC$ will increase

• Supply of AC$ to increase

• Demand for CNY to increase

• Supply of CNY to increase

Given an increase in interest rates in the United States which would best describe the change in supply and demand for USD:

• Increase in Supply and Increase in Demand.

• Decrease in Supply and Increase in Demand.

• Decrease in Supply and Decrease in Demand.

• Increase in Supply and Decrease in Demand

Assuming Andrewtopia places a quota on imported widgets from China, what will happen to the demand for CNY?

• Increase in Demand for CNY

• Decrease in Demand for CNY

• No Change in Demand for CNY

• Uncertain/not enough information