The Hong Kong dollar is pegged to the U.S. dollar at a rate of 7.8 Hong Kong dollars to 1 U.S. dollar. Suppose the central bank of Hong Kong changes the exchange value to 7.3 Hong Kong dollars to 1 U.S. dollar. Which of the following is most likely to be true in this context?

Question

Quizplus · Accepted Answer

The Hong Kong dollar has been revalued because the exchange rate changed from 7.8 to 7.3 Hong Kong dollars for 1 U.S. dollar, meaning it now takes fewer Hong Kong dollars to buy 1 U.S. dollar. This indicates an increase in the value of the Hong Kong dollar relative to the U.S. dollar. The percentage change is not 0.5 percent but rather a calculation based on the change in the exchange rate, which is approximately 6.4 percent when calculated correctly.

The Hong Kong Dollar Is Pegged to the U