Which One of These Statements Is Correct Assuming Exchange Rates

question 4

Multiple Choice

Which one of these statements is correct assuming exchange rates are quoted as units of foreign currency per dollar?

• A)When the dollar strengthens,it takes more dollars to obtain one unit of a foreign currency.
• B)If the U.S.inflation rate is lower than the inflation rate in Canada,then the U.S.dollar will depreciate relative to the Canadian dollar.
• C)When a foreign currency appreciates in value it strengthens relative to the dollar.
• D)As the U.S.dollar strengthens,one British pound will purchase more U.S.dollars.
• E)The exchange rate is unaffected by differences in the inflation rates of the two countries.

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Definitions:

Bell-shaped

A description often used for the symmetrical, rounded shape of a normal distribution curve.

Symmetric

In mathematics and statistics, symmetric indicates that a shape, function, or distribution is mirror-like, showing balance around a central point or axis.

Standard Normal Table

A mathematical table used in statistics to find areas under the curve of a standard normal distribution for various z-scores.

Probabilities

Probabilities measure the likelihood or chance of a specific outcome or event occurring.