Exchange Rate Change Terminology in Floating vs. Fixed Systems

Steps:

• Define exchange rate changes: decrease means currency loses value; increase means it gains value.
• In floating systems, market forces cause changes, termed depreciation (decrease) and appreciation (increase).
• In fixed systems, government adjusts the peg, using devaluation (decrease) and revaluation (increase).
• Match choices to systems: select pair aligning with floating terminology for market-driven changes.

Why B is correct:

• Depreciation and appreciation describe market-induced value changes in floating systems, per standard international economics definitions.

Why the others are wrong:

• A: Revaluation applies only to official upward adjustments in fixed systems.
• C: Devaluation refers to official downward adjustments in fixed systems.
• D: Both terms describe government actions in fixed systems only.

Final answer: B