Edexcel A-Level Economics A2 4.3.3 2e Distinction Between Devaluation and Depreciation of a Currency Topic Practice

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Question 1

[Maximum number: 1]

The exchange rate of the United Arab Emirates (UAE) currency, the dirham, is fixed against the US dollar. Assume that the UAE Government instructed the country's central bank to reduce the exchange rate of the dirham against the dollar.

Which one of the following would best describe the impact of this policy?

A

The exchange rate would appreciate

B

The exchange rate would be devalued

C

The exchange rate would depreciate

D

The exchange rate would be revalued

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