Suppose That, in Year 1, the Price of the U

question 11

Multiple Choice

Suppose that, in Year 1, the price of the U.K. pound is $1.44 = £1. In year 2, the price is $1.48 = £1. An economist would validly conclude that, from Year 1 to Year 2, the U.K. pound __________ relative to the U.S. dollar and, simultaneously, the U.S. dollar __________ relative to the U.K. pound.

• A) appreciated; appreciated
• B) appreciated; depreciated
• C) depreciated; appreciated
• D) depreciated; depreciated

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Definitions:

Annuity

A financial instrument that disburses a set series of payments to a person, often employed as a revenue flow for individuals in retirement.

Rate of Return

The increase or decrease in the value of an investment for a given time frame, represented as a proportion of the investment's starting price.

Present Value Factor

A factor used in discounting future payments or receipts to determine their present value, considering the time value of money.

Cash Flows

The movement of cash into and out of a business, reflecting operational, investing, and financing activities.