A person holding dollar deposits during the devaluation of the dollar would
A) enjoy a monetary gain.
B) see the foreign currency value of dollar assets increase by the amount of the exchange rate change.
C) shift their wealth into domestic investments.
D) suffer a monetary loss and see the foreign currency value of dollar assets decrease by the amount of the exchange rate change.
E) see no change in their investments.

Question

Quizplus · Accepted Answer

During a devaluation of the dollar, the exchange rate becomes unfavorable, meaning that the value of the dollar decreases in comparison to other foreign currencies. Therefore, a person holding dollar deposits would suffer a monetary loss as the foreign currency value of the assets decreases by the amount of the exchange rate change.

A Person Holding Dollar Deposits During the Devaluation of the Dollar