Exhibit 21-7 Foreign exchange market for U.S. dollars and British pounds

Exhibit 21-7 shows a situation in which:

Question

Exhibit 21-7 Foreign exchange market for U.S. dollars and British pounds
 
Exhibit 21-7 shows a situation in which:

Quizplus · Accepted Answer

The exchange rate has increased from $1.60 to $1.70 per pound, which means that the pound has appreciated relative to the dollar. At the same time, the exchange rate has decreased from £0.625 to £0.588 per dollar, which means that the dollar has depreciated relative to the pound. Therefore, the correct choice is C, the dollar has depreciated and the pound has appreciated.

Exhibit 21-7 Foreign Exchange Market for U