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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

What does it mean to say that the U.S. dollar has depreciated in value in relation to the Mexican peso? What does it mean to say that the Mexican peso has appreciated in value relative to the U.S. dollar?

To determine

The depreciation of U.S. dollar and appreciation of Mexican peso.

Explanation

Depreciation is the reduction of value of a currency and appreciation refers to increase in the value of currency in terms of another currency. When the exchange rate in terms of other currency is lower than the equilibrium exchange rate, it refers to an appreciation to the domestic currency whereas, when the exchange rate of a currency in terms of other currency is higher than the equilibrium exchange rate, it is termed as depreciation. For example, the equilibrium exchange rate is 0.10 dollar equal to 1 peso, and the exchange rate increases as 0...

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