Question : When a country's currency appreciates, it means that:
Option 1: Its value increases relative to other currencies.
Option 2: Its value decreases relative to other currencies.
Option 3: Its value remains constant.
Option 4: None of the above.
Correct Answer:
Its value increases relative to other currencies.
Solution : The correct answer is a) Its value increases relative to other currencies.
Currency appreciation refers to an increase in the value of a country's currency relative to other currencies. This means that it takes fewer units of the country's currency to purchase another currency. For example, if the exchange rate between the US dollar and the euro changes from 1 USD = 0.85 EUR to 1 USD = 0.90 EUR, it means that the US dollar has appreciated in value relative to the euro. In this case, it would take fewer US dollars to buy 1 euro.
