Given a two-country world,suppose Japan devalues the yen by 20 percent and South Korea devalues the won by 15 percent.This results in:
A) An appreciation in the value of both currencies
B) A depreciation in the value of both currencies
C) An appreciation in the value of the yen against the won
D) A depreciation in the value of the yen against the won

Question

Quizplus · Accepted Answer

Devaluing a currency means reducing its value relative to other currencies. In this case, both Japan and South Korea have devalued their currencies. When the yen is devalued by 20 percent and the won is devalued by 15 percent, it means that the yen is now worth less than before relative to the won. Therefore, the yen has depreciated in value against the won. Thus, option D is the correct answer.

Given a Two-Country World,suppose Japan Devalues the Yen by 20