Sia
Question
Statistics
Posted 8 months ago
The exchange rate of the Guatemalan quetzal to the U.S. dollar is 10 quetzal per dollar.
If the exchange rate changes to 5 quetzal per dollar, what happened to the value of the quetzal and what happens to Guatemala's exports?
Choose 1 answer:
(A) The quetzal appreciated and its exports will increase.
(B) The quetzal depreciated and its exports are unaffected.
(c) The quetzal appreciated and its exports will increase.
(D) The quetzal depreciated and its exports will increase.
(E) The quetzal appreciated and its exports will decrease.
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Answer from Sia
Posted 8 months ago
Solution by Steps
step 1
To understand the change in value of the Guatemalan quetzal, we compare the initial and final exchange rates. Initially, the exchange rate is quetzal per dollar
step 2
After the change, the exchange rate is quetzal per dollar. This means that now fewer quetzals are needed to buy one dollar, indicating that the value of the quetzal has increased relative to the dollar
step 3
An appreciation of the quetzal makes Guatemalan exports more expensive in terms of foreign currencies, which could lead to a decrease in exports because foreign buyers would have to spend more of their currency to buy the same amount of Guatemalan goods
Answer
E
Key Concept
Exchange rate impact on currency value and exports
Explanation
When the exchange rate decreases from 10 to 5 quetzal per dollar, the quetzal has appreciated. An appreciated domestic currency can make exports more expensive and potentially decrease them.
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