On a given day, the exchange rate for one U.S. dollar is 1.2 Canadian dollars and 0.5 British pounds. Exactly six months later, the exchange rate for one U.S. dollar is 1.1 Canadian dollars and 0.7 British pound. From the information given, we can say that:
A) the dollar has appreciated relative to Canadian dollars and depreciated relative to British pounds.
B) the dollar has appreciated relative to British pounds and depreciated relative to Canadian dollars.
C) the dollar has appreciated relative to both British pounds and Canadian dollars.
D) the dollar has depreciated relative to both British pounds and Canadian dollars.
E) there is no change in the relative value of the U.S. dollar.

Question

Quizplus · Accepted Answer

Initially, 1 USD = 1.2 CAD and 1 USD = 0.5 GBP
After six months, 1 USD = 1.1 CAD and 1 USD = 0.7 GBP
This means that the USD has appreciated relative to the GBP (from 0.5 to 0.7) and depreciated relative to the CAD (from 1.2 to 1.1). Therefore, option B is the correct choice.

On a Given Day, the Exchange Rate for One U