When the value of a currency experiences exchange-rate appreciation, its value:
A) increases relative to the value of another currency.
B) can buy more goods and services in its own country.
C) decreases relative to the value of another currency.
D) has experienced inflation relative to other currency.

Question

Quizplus · Accepted Answer

Exchange-rate appreciation means that the currency has increased in value compared to another currency. Therefore, it can buy more units of that currency, which means it is more valuable. This is option A. Option B is not correct because exchange-rate appreciation does not necessarily mean that the currency can buy more goods and services in its own country, only that it is worth more compared to another currency. Option C is incorrect because exchange-rate appreciation means that the currency is worth more, not less. Option D is also incorrect because exchange-rate appreciation does not necessarily mean that there has been inflation, only that the currency is more valuable compared to another currency.

When the Value of a Currency Experiences Exchange-Rate Appreciation, Its