In considering pounds and dollars, when the dollar rate of exchange for the British pound rises:
A)the pound rate of exchange for the dollar will fall.
B)the pound rate of exchange for the dollar will also rise.
C)the pound rate of exchange for the dollar may either fall or rise.
D)Canadian net exports to Britain will tend to fall.

Question

Quizplus · Accepted Answer

When the dollar rate of exchange for the British pound rises, it means that the dollar has appreciated in value compared to the pound. As a result, it will now take less pounds to buy one dollar. This means that the pound rate of exchange for the dollar will fall, as it now takes more pounds to buy one dollar. Therefore, choice A is the correct answer. Option B is incorrect because if the dollar rate of exchange rises, it means the pound has weakened, therefore it does not make sense for the pound rate of exchange to also rise. Option C is also incorrect because there is a clear relationship between the two currencies in this scenario. Lastly, option D is also irrelevant to the question as it refers to Canada's net exports to Britain, which has no direct relationship with the exchange rate between the pound and the dollar.

In Considering Pounds and Dollars, When the Dollar Rate of Exchange