A change from USD 3 = GBP 1 to USD 2 = GBP 1 represents ___________.

a depreciation of the dollar

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an appreciation of the dollar

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an appreciation of the pound

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None of the above

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Solution

The correct option is A an appreciation of the dollar
As now less dollars have to be exchanged to buy one pound, the value of the dollar against the pound has increased and its cheaper to buy pounds, this is know as an appreciation of the currency (in this case dollar).

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d

\frac{1}{3}

$ 30.00

Time $t$ (years)	$0$	$1$	$2$	$5$
Value $v (t)$ (dollars)	$15, 000$	$13, 000$	$10, 900$	$3, 000$

. I t s v a l u e d e p r e c i a t e s a t t h e r a t e s h o w n i n t h e t a b l e a b o v e . B a s e d o n a l e a s t - s q u a r e s l i n e a r r e g r e s s i o n, w h a t i s t h e v a l u e, t o t h e n e a r e s t h u n d r e d d o l l a r s, o f t h e c a r w h e n

The compound interest is always same whether there is a depreciation or appreciation.

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