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.

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Definitions:

Aggregate Supply

The total supply of goods and services available to an economy from producers at a given overall price level and at a given time period.

Hyperinflation

An extremely high and typically accelerating inflation rate, causing a rapid erosion of currency's value.

Deflation

A decrease in the general price level of goods and services, often characterized by the increase in the value of money.

Disinflation

Disinflation is the process of slowing down the rate of inflation, indicating a reduction in the speed at which the general level of prices for goods and services is rising.