If the initial exchange rate is $2 per pound and then rises to $3 per pound, we would say that the pound has:
A) appreciated against the dollar.
B) depreciated against the dollar.
C) appreciated against the pound.
D) depreciated against the pound.
E) dollarized against the pound.

Question

Quizplus · Accepted Answer

When the exchange rate rises from $2 per pound to $3 per pound, it means that now it takes more dollars to buy the same amount of pounds. This indicates that the value of the pound has increased relative to the dollar, which is defined as appreciation.

If the Initial Exchange Rate Is $2 Per Pound and Then