When the value of a currency decreases relative to other currencies, we say that a currency experiences:
A) exchange-rate appreciation.
B) exchange-rate depreciation.
C) interest-rate appreciation.
D) interest-rate depreciation.

Question

Quizplus · Accepted Answer

When the value of a currency decreases in comparison to other currencies, it is said to experience exchange-rate depreciation. This means that the currency can buy fewer units of foreign currency, making imports more expensive and exports less expensive. Exchange-rate appreciation, on the other hand, describes an increase in the value of a currency relative to others. Interest-rate appreciation and depreciation are related to changes in interest rates rather than exchange rates.

When the Value of a Currency Decreases Relative to Other