When the Nominal Exchange Rate Changes from 10 Pesos Per

question 34

Multiple Choice

When the nominal exchange rate changes from 10 pesos per dollar to 8 pesos per dollar, the dollar has:

• A)appreciated.
• B)depreciated.
• C)become overvalued.
• D)become undervalued.

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Definitions:

Fixed Costs

Fixed costs refer to business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance premiums.

ROI

Return on Investment, a performance metric used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as materials and labor.

Operating Assets

Assets utilized in the day-to-day operations of a business to generate revenue.