pound to (28) When and the exchange rate for the British pound changes from $1.8

Question

pound to (28) When and the exchange rate for the British pound changes from $1.80 per 91.60 per pound, then, holding everything else constant, the pound has expensive. A) depreciated: American wheat sold in Britain becomes more B) depreciated, American wheat sold in Britain becomes less C) appreciated; British cars sold in the United States become more )appreciated; British cars sold in the United States become less (29) Everything else held constant, increased demand for a country's exports causes its currency to in the long run, while increased demand for imports causes its currency to A) depreciate; appreciate B) depreciate; depreciate C) appreciate; appreciate D) appreciate; depreciate (30) A decrease in the domestic real interest rate causes the demand for domestic assets to constant. and the domestic currency to toeverything else held A) decrease; appreciate B) decrease; depreciate C) increase; appreciate D) increase; depreciate 10-

Explanation / Answer

Question 28

Initially, the exchange rate was $1.80 per pound.

After change, exchange rate has become $1.60 per pound.

This implies that, now, 1 pound is able to purchase less dollars relative to initial situation. This means pound has depreciated and thus imports to Britain will become expensive. This implies that American wheat sold in Britain becomes more expensive.

So, holding everything else constant, the pound has depreciated and American wheat sold in Britain becomes more expensive.

The correct answer is the option (A).

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