Concerning the exchange rate index of the U.S.dollar, suppose that the dollar's real exchange rate index rises from 95 to 115.This means that
A) the dollar has depreciated against the currencies of its major trading partners.
B) the dollar has appreciated against the currencies of its major trading partners.
C) the dollar's nominal exchange rate index falls.
D) the dollar's nominal exchange rate index remains constant.

Question

Quizplus · Accepted Answer

An increase in the dollar's real exchange rate index means that the dollar has become more valuable relative to other currencies. This is equivalent to an appreciation of the dollar against the currencies of its major trading partners. Therefore, option B is the correct choice. Option A is incorrect as it describes a depreciation of the dollar. Option C is incorrect as the nominal exchange rate index is not mentioned in the question. Option D is also incorrect as it contradicts the information provided in the question.

Concerning the Exchange Rate Index of the U