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# Currency Appreciation/Depreciation

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If we are comparing the U.S. dollar to the euro, and the euro increased in value from \$1.35 to \$1.45, what happened to the two currencies? Show the appreciation or depreciation rate for each currency. (Show all work/calculations/formulas.) If we are comparing the U.S. dollar to the yen, and the yen decreased in value from \$.99 cents to \$.90 cents, what happened to the two currencies? Show the appreciation or depreciation rate for each currency.

#### Solution Preview

If we are comparing the U.S. dollar to the euro, and the euro increased in value from \$1.35 to \$1.45, what happened to the two currencies? Show the appreciation or depreciation rate for each currency. (Show all work/calculations/formulas.) If we are comparing the U.S. dollar to the yen, and the yen decreased in value from \$.99 cents to \$.90 cents, what happened to the two currencies? Show the appreciation or depreciation rate for each currency.

If we are comparing the U.S. dollar to the euro, and the euro increased in value from \$1.35 to \$1.45, what happened to the two currencies? Show the appreciation or depreciation rate for each currency. (Show all work/calculations/formulas.)

Euro- Dollar

Initial quote= \$1.35 /Euro
Final quote= \$1.45 /Euro

Euro
Initial value= 1 Euro= \$1.35
Final value= 1 Euro= \$1.45

Initially it costs \$1.35 to buy ...

#### Solution Summary

Calculates appreciation/depreciation of Euro and Yen vs. dollar.

\$2.19

## Increasing the Money Supply: Appreciation/Depreciation

As an economist, you know that when a country depreciates its currency, initially its competitiveness in the world markets increases. You also know that currency appreciation improves the prospects of foreign investments which will likely increase GDP. The head of state has turned to you for your wise council. Why would you be reluctant to advise that your country increases its money supply?

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