An increase in the value of the foreign currency in terms of the domestic currency means that ________.

Question

Quizplus · Accepted Answer

When the value of foreign currency increases in terms of domestic currency, it means that it requires more units of domestic currency to purchase a unit of foreign currency. Therefore, the domestic currency has depreciated and the foreign currency has appreciated. This also means that the nominal exchange rate has fallen, as it now takes fewer units of foreign currency to purchase the same amount of domestic currency.

An Increase in the Value of the Foreign Currency in Terms