The conclusion based on the scenario is that the Canadian Dollars has depreciated from its yesterday's value by 33%.
This depreciation of the Canadian Dollars also means that the US Dollars has relatively appreciated compared to the Canadian Dollars.
Data and Calculations:
Yesterday's exchange rate between US dollars and Canadian Dollars = $100 US = $150 Canadian
The exchange rate = US$1 = CAD$1.50 ($150/$100)
Today's exchange rate = $150 US = $300 Canadian
= US$1 = CAD$2.00 ($300/$150)
Thus, the Canadian Dollars has depreciated from yesterday's to today's value by 33% ($0.50/$1.50 x 100).
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Answer: Exchange Rate and Purchasing Power Quick Check
1. If 100 U.S. dollars traded for 150 Canadian dollars yesterday, but 150 U.S. dollars trades for 300 Canadian dollars today, which of the following is correct?
- The U.S. dollar appreciated with respect to the Canadian dollar, and the Canadian dollar depreciated with respect to the U.S. dollar.
2. One U.S. dollar trades for 110 yen. Which of the following correctly explains the effect on Japanese automobile prices for holders of U.S. dollars if the U.S. dollar appreciated relative to the yen?
- Since one U.S. dollar is worth more yen, Japanese automobiles are relatively less expensive to holders of U.S. dollars.
3. If the inflation rate in New Zealand were to rise relative to the inflation rate in Russia, which of the following correctly explains what would happen to the exchange rate for the New Zealand dollar in terms of Russian rubles?
- The rubles-per-dollar exchange rate would fall since the inflation increases the supply of dollars and decreases the demand for dollars.
4. Interest rates in Brazil are rising relative to those in the United States. Which of the following correctly describes the change in values of the Brazilian real and the U.S. dollar with respect to one another?
- The U.S. dollar is depreciating while the Brazilian real is appreciating.
5. If the United Kingdom's pound sterling is depreciating with respect to currencies in the rest of the world, which of the following correctly explains the resulting impact on the United Kingdom's balance of trade?
- The United Kingdom will likely export more goods, increasing its balance of trade with the rest of the world
Explanation: !00% correct