Exchange Rate and Purchasing Power Quick Check

Question

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Question
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?(1 point)
Responses

The U.S. dollar depreciated with respect to the Canadian dollar, and the Canadian dollar appreciated with respect to the U.S. dollar.
The U.S. dollar depreciated with respect to the Canadian dollar, and the Canadian dollar appreciated with respect to the U.S. dollar.

The U.S. dollar depreciated with respect to the Canadian dollar, and the Canadian dollar depreciated with respect to the U.S. dollar.
The U.S. dollar depreciated with respect to the Canadian dollar, and the Canadian dollar depreciated with respect to the U.S. dollar.

The U.S. dollar appreciated with respect to the Canadian dollar, and the Canadian dollar depreciated with respect to the U.S. dollar.
The U.S. dollar appreciated with respect to the Canadian dollar, and the Canadian dollar depreciated with respect to the U.S. dollar.

The U.S. dollar appreciated with respect to the Canadian dollar, and the Canadian dollar appreciated with respect to the U.S. dollar.
The U.S. dollar appreciated with respect to the Canadian dollar, and the Canadian dollar appreciated with respect to the U.S. dollar.
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Answer 1

To analyze the situation, let's break down the exchange rates given:

1. Yesterday: 100 U.S. dollars = 150 Canadian dollars

   • This means that 1 U.S. dollar = 1.5 Canadian dollars (or 1.5 CAD/USD).

2. Today: 150 U.S. dollars = 300 Canadian dollars

   • This means that 1 U.S. dollar = 2 Canadian dollars (or 2 CAD/USD).

Now, we compare the two exchange rates:

• Yesterday's rate: 1 USD = 1.5 CAD
• Today's rate: 1 USD = 2 CAD

The change in value from 1.5 CAD to 2 CAD indicates that the U.S. dollar has increased in value relative to the Canadian dollar. In other words, it now takes more Canadian dollars to buy 1 U.S. dollar, which means:

• The U.S. dollar appreciated with respect to the Canadian dollar (because it can now buy more CAD).
• The Canadian dollar depreciated with respect to the U.S. dollar (because it is now worth less compared to USD).

Based on this analysis, the correct response is:

The U.S. dollar appreciated with respect to the Canadian dollar, and the Canadian dollar depreciated with respect to the U.S. dollar.