Asked by Samuel Flores on Jul 17, 2024
Verified
An increase in the US demand for British pounds causes
A) An appreciation of the pound
B) Depreciation of the dollar
C) None of the above
D) Both a and b
US Demand
The total quantity of goods and services that consumers in the United States are willing and able to purchase at a given price level and time.
British Pounds
The official currency of the United Kingdom, symbolized as £.
Appreciation
An increase in the value of an asset over time.
- Comprehend the impact of currency appreciation and depreciation on the appeal of domestic products to international markets.
- Understand the principle of purchasing power parity and its effects on the valuation of currency in relation to inflation and price differences among nations.
Verified Answer
MA
Muhammad AshfaqJul 22, 2024
Final Answer :
D
Explanation :
When there is an increase in US demand for British pounds, there is greater demand for the pound relative to the supply, causing an appreciation in the value of the pound. This means that one pound can purchase more US dollars than before, implying a depreciation of the US dollar. Therefore, both option a and b are correct.
Learning Objectives
- Comprehend the impact of currency appreciation and depreciation on the appeal of domestic products to international markets.
- Understand the principle of purchasing power parity and its effects on the valuation of currency in relation to inflation and price differences among nations.
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