Question

Initially, the exchange rate between Macedonian denars and Canadian dollars is in equilibrium. Then, there is a decrease in demand for Canadian dollars. As a result of a decrease in demand for Canadian dollars, what happens to Macedonia's currency in relation to Canada's currency?
a. no change in Macedonian denars
b. an appreciation in Macedonian denars
c. a depreciation in Macedonian denars
Also, as a result of a decrease in demand for Canadian dollars, what happens to Canada's currency in relation to Macedonia's currency?
a. a depreciation in Canadian dollars
b. no change in Canadian dollars
c. an appreciation in Canadian dollars

Answer 1

Answer:

b. an appreciation in Macedonian denars 

a. a depreciation in Canadian dollars

Explanation:

An appreciation of currency means the value of a currency rises in relation to another country's currency.

Depreciation of a currency is when the value of a currency of a county falls in relation to another country's currency.

If there is a decrease in demand for Canadian dollars, the value of Macedonia's currency increases because more of Macedonia's currency is demanded for in relation to Canadian dollars. Therefore, Macedonia's currency would appreciate while Canadian dollars would depreciate.