The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-A decrease in the price of a currency in terms of another under a flexible exchange rate regime is called:
A)capital flight.
B)depreciation.
C)revaluation.
D)devaluation.
E)currency adjustment.

Question

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2
 
-A decrease in the price of a currency in terms of another under a flexible exchange rate regime is called:
A)capital flight. 
B)depreciation. 
C)revaluation. 
D)devaluation. 
E)currency adjustment.

Quizplus · Accepted Answer

A decrease in the price of a currency in terms of another currency is called depreciation. Depreciation refers to a decline in the value of a currency resulting in that currency being worth less in terms of another currency. Devaluation, on the other hand, is a deliberate downward adjustment in the official exchange rate. So, option B is the correct choice.

The Figure Given Below Depicts the Foreign Exchange Market for British