When the value of one currency decreases relative to the value of another currency, the currency with decreasing value has experienced:
A) exchange-rate appreciation.
B) exchange-rate depreciation.
C) interest-rate appreciation.
D) interest-rate depreciation.

Question

Quizplus · Accepted Answer

When the value of one currency decreases relative to the value of another currency, it has experienced exchange-rate depreciation. This means that it now takes more units of that currency to purchase the same amount of the other currency. The terms "interest-rate appreciation" and "interest-rate depreciation" refer to changes in the interest rates of a particular currency, which may or may not have an effect on its exchange rate.

When the Value of One Currency Decreases Relative to the Value