If fewer dollars will buy a unit of foreign currency, then the foreign currency is ________.

Question

Quizplus · Accepted Answer

If fewer dollars will buy a unit of foreign currency, then the foreign currency is weakening. This means that the exchange rate has increased, and it takes more dollars to buy the same amount of foreign currency as before. This is opposite to strengthening, which would mean that the exchange rate has decreased, and it takes fewer dollars to buy the same amount of foreign currency. Violating the law of purchasing power parity or not being in equilibrium are not relevant to this scenario.

If Fewer Dollars Will Buy a Unit of Foreign Currency