Under a Flexible Exchange Rate System, an Increase in the Value

question 233

Multiple Choice

Under a flexible exchange rate system, an increase in the value of the U.S. dollar in terms of other currencies is referred to as

• A) a depreciation of the U.S. dollar.
• B) an appreciation of the U.S. dollar.
• C) a monetizing of the U.S. dollar.
• D) a devaluation of the U.S. dollar.

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Definitions:

Reserve Currency

A foreign currency held in large amounts by governments and institutions as part of their foreign exchange reserves.

Financial Crisis

A situation where financial assets suddenly lose a large part of their nominal value, often leading to a collapse of markets and economies.

Weakening

A term often used to describe a decline in the strength or value of an asset or currency.

Portfolio Investment

Investments in a variety of financial assets, such as stocks, bonds, and commodities, to diversify risks.