If the Exchange Rate Changes from 1 Euro Per U

question 109

Multiple Choice

If the exchange rate changes from 1 euro per U.S. dollar to 1.2 euros per U.S. dollar, the Euro has

• A) appreciated, since its value has increased.
• B) appreciated, since the price of U.S. dollars has increased.
• C) appreciated, making U.S. goods cheaper in Euros.
• D) depreciated, since its value has declined.
• E) depreciated, since its value has increased.

---

Definitions:

Government Spending

Expenditures made by the government sector including spending on goods and services, public projects, and transfer payments.

Economic Expansion

A phase in the business cycle where the economy grows and increases in activity.

Budget Deficits

Occurs when a government's expenditures surpass its revenues during a given period, leading to borrowing or use of saved funds.

Budget Surpluses

Budget surpluses occur when a government's revenue exceeds its expenditures over a specific period of time.