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Question : Under a flexible exchange rate, when the price of domestic currency in terms of foreign currency increases, it is called_______

 

Option 1: Depreciation of domestic currency

Option 2:  Appreciation of domestic currency

Option 3: Devaluation of domestic currency

Option 4: Revaluation of domestic currency


Team Careers360 19th Jan, 2024
Answer (1)
Team Careers360 22nd Jan, 2024

Correct Answer:  Appreciation of domestic currency


Solution : A flexible exchange rate system is one in which the market's supply and demand for money determine the exchange rate. The value of the currency is free to alter in response to shifts in the supply and demand for foreign currencies under a flexible exchange rate system. Under a flexible exchange rate when the price of domestic currency in terms of foreign currency increases it is called appreciation of domestic currency.

 

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