Question

Question 7 Unsaved If the nominal exchange rate was one U.S. dollar for 0.6 British pounds sterling and then changed to one dollar for each 0.5 British pound, we could accurately state that the dollar appreciated in relation to the pound and the pound depreciated in relation to the dollar. Question 7 options:

True or False

Answer 1

The statement is TRUE

the dollar appreciated in relation to the pound and the pound depreciated in relation to the dollar.

how to understand this let us take the exchange rate before and after the depreciation, subtract the smaller number from the greater, divide the result by the greater number, and multiply by 100. For example if the GBP/USD before depreciation was 1.6 and after the depreciation became 1.5, do the following to calculate the pound(GBP) depreciation:

1.6 is greater than 1.5, so we subtract 1.6 from 1.5 and get 1.6-1.5=0.1

Then we divide 0.1 by the greater exchange rate number, which is 1.6, and multiply the result by 100: 0.1/1.6 x 100 = 6.25%.

This means that over the given period, the pound depreciated against the U.S. dollar by 6.25 percent.