Question

The US$/Euro exchange rate today is 1.10 US$/Euro. The US$/Euro exchange rate in 3 months’ time are indicated below. Which of the following indicate a depreciation of the Euro relative to the US$?

A. 1.05 US$/Euro

B. 1.20 US$/Euro

C. 1.15 US$/Euro

D. 1.08 US$/Euro

Group of answer choices

A and D only

A and B only

C and D only

A and C only

B and C only

Answer 1

The depreciation of currency happens when one currency depreciate in relation to another currency.

In this case 1 Euro was valued at $1.10. Now the depreciation in Euro happens when we have to pay less dollars for the same amount of Euro which in this case the A and D option only. So 1st option is the correct answer.

The US/Euro exchange rate is 1.10, and in case A and D,

The US/Euro becomes 1.05 and 1.08 which means that to get a US dollar more Euro has to be spent which shows the currency depreication and for US dollar less amount of Euro is going to pay to purchase it, which shows currency appreciation for US Dolalr.