If the exchange rate (dollars per unit of foreign currency)has decreased because of a shift of the supply curve,the demand curve,or both,we say there has been a(n)
A) appreciation of the foreign currency
B) depreciation of the foreign currency
C) revaluation of the foreign currency
D) devaluation of the foreign currency
E) fixing of the foreign currency

Question

Quizplus · Accepted Answer

A decrease in the exchange rate means that it now takes more dollars to purchase the same amount of foreign currency, which indicates a depreciation of the foreign currency. This could be caused by a shift in the supply curve (increased supply of the foreign currency) or a shift in the demand curve (decreased demand for the foreign currency), or both. The other choices do not accurately describe this situation.

If the Exchange Rate (Dollars Per Unit of Foreign Currency)has