1. The U.S. dollar is currently trading for 1.31 Bulgarian levas (BGN) per dolla

Question

1. The U.S. dollar is currently trading for 1.31 Bulgarian levas (BGN) per dollar. If the exchange rate adjusts to 1.5 Bulgarian levas per 1 U.S. dollar then the BGN has appreciated. the U.S. dollar has appreciated. the U.S. dollar has depreciated. both the BGN and the U.S. dollar have appreciated. both the BGN and the U.S. dollar have depreciated. 2. Suppose Hondurans began purchasing real assets in the United States. How would this impact the foreign exchange market for the lempira and the dollar price of the lempira?

Demand for lempira / Dollar price of lempira Increase / Increase Increase / Decrease Decrease / Decrease Decrease / Increase Decrease / Not Change 1. The U.S. dollar is currently trading for 1.31 Bulgarian levas (BGN) per dollar. If the exchange rate adjusts to 1.5 Bulgarian levas per 1 U.S. dollar then the BGN has appreciated. the U.S. dollar has appreciated. the U.S. dollar has depreciated. both the BGN and the U.S. dollar have appreciated. both the BGN and the U.S. dollar have depreciated.

Explanation / Answer

Q1) Answer: 2nd option

This is the appreciation of dollar. It happens because BGN increases; it means dollar becomes more valuable by the currency BGN --- earlier 1 dollar could be purchased by spending 1.31 BGN, now such purchasing requires 1.5 BGN.

Q2) Answer: 3rd option

Demand of lempira should decrease, because such currency will be spending for purchasing dollar; actually the demand of dollar would increase.

It increases the price of dollar, since its demand increases.

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