The exchange rate of the Schrute buck $(S B)$ to the Stanley nickel $(S N)$ between 2016 and 2017 is given in the table below.
\begin{tabular}{lll}
Year & $S B$ needed to buy $1 S N$ & SN needed to buy $1 S B$ \
\hline 2016 & 5 & 0.2 \
2017 & 4 & 0.25
\end{tabular}

What can we definitely say happened between 2016 and 2017 ?
Choose 1 answer:
(A) The $S B$ can buy fewer goods domestically
(B) The real interest rate in the country that uses the $S B$ decreased
(C) The $S B$ depreciated
(D) The $S B$ appreciated
(E) The $S B$ can buy more goods domestically

Question

The exchange rate of the Schrute buck $(S B)$ to the Stanley nickel $(S N)$ between 2016 and 2017 is given in the table below.
\begin{tabular}{lll} 
Year & $S B$ needed to buy $1 S N$ & SN needed to buy $1 S B$ \
\hline 2016 & 5 & 0.2 \
2017 & 4 & 0.25
\end{tabular}

What can we definitely say happened between 2016 and 2017 ?
Choose 1 answer:
(A) The $S B$ can buy fewer goods domestically
(B) The real interest rate in the country that uses the $S B$ decreased
(C) The $S B$ depreciated
(D) The $S B$ appreciated
(E) The $S B$ can buy more goods domestically

Accepted Answer

∻Solution∻ ‖ a ⋮ Exchange Rate Change: In 2016, 5 $S B$ were needed to buy 1 $S N$, and in 2017, only 4 $S B$ were needed to buy 1 $S N$. This indicates that the $S B$ has become stronger relative to the $S N$. ‖‖ b ⋮ Depreciation/Appreciation: Since fewer $S B$ are needed to buy 1 $S N$ in 2017 compared to 2016, the $S B$ has appreciated. ‖ ∻Answer∻ ⚹ (D) The $S B$ appreciated ⚹ ∻Key Concept∻ ⚹ Currency Appreciation ⚹ ∻Explanation∻ ⚹ When fewer units of a currency are needed to purchase one unit of another currency, it indicates that the first currency has appreciated. In this case, the $S B$ appreciated from 2016 to 2017. ⚹◊What effect did the changes in the exchange rate between the Schrute buck and the Stanley nickel have on the trade balance between the two currencies⍭ Generate me a similar question◊

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