Question

1. When market participant appreciate a currency what happens to its value?

a. it appreciates

b. it depreciates

c. it goes up

d. it goes down in value

2. When a country adopts another country's currency as their own, this is called.

a. pegged exchange rate

b. dollarization

c. flexible exchange rate

d. original sin

Answer 1

Answer 1) When market participant appreciates the currency the value will goes up as the purchasing power will go up. For eg - initially $1 = 70 rupees and after appreciation $ 1= 60 rupees as dollar is appreciated which means US individuals will purchase more of Indian goods with same $1 it means the value of US dollar has increased.

So, option c) is correct.

Answer 2)  In pegged exchange rate, also known as a fixed exchange rate, is where the currency of one country is tied to a usually stronger currency, such as the euro, US dollar or pound sterling.

So, option a) is correct.

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