Question

Suppose the exchange rate between the Danish krone and the U.S. dollar is 14 DKK = $1 and the exchange rate between the Chilean peso and the U.S. dollar is 220 CLP = $1. The exchange rate between the U.S. dollar and the Danish krone in terms of dollars per krone is $ (Round your response to four decimal places.) The exchange rate between the U.S. dollar and the Chilean peso in terms of dollars per peso is $ . (Round your response to four decimal places.) The exchange rate between the Danish krone and the Chilean peso is ID (Round your response to four decimal places.) The exchange rate between the Danish krone and the Chilean peso is DKK. (Round your response to four decimal places.) Suppose the exchange rate between the krone and the dollar changes to 12 DKK = $1 and the exchange rate between the peso and the dollar changes to 240 CLP = $1. In this case, the O A. U.S. dollar has depreciated against the Danish krone. O B. Chilean peso has appreciated against the U.S. dollar. OC. U.S. dollar has depreciated against the Chilean peso. O D. Chilean peso has appreciated against the Danish krone.

Answer 1

Given,

14 DKK = $1 => 1 DKK = $1/14 = $0.0714

Q1. Therefore, 1 DKK = $0.0714

220 CLP = $1 => 1 CLP = 1$1/220 = $0.0045

Q2. Therefore, 1 CLP = $0.0045

As we have, 1 DKK = $1/14 = 1/14 x 220 CLP = 15.7143 CLP

Q3. Therefore, 1 DKK = 15.7143 CLP

1 CLP = $1/220 = 1/220 x 14 DKK = 0.0636 DKK

Q4. Therefore, 1 CLP = 0.0636 DKK

Given that the changed exchange rates are 12 DKK = $1 and 240 CLP = $1

Since, 1 USD can purchase less DKK now, USD has depreciated against DKK. 1 USD can purchase higher DKK now. Hence, USD has appreciated against CLP

From the rule of transitivity, we have that if USD has depreciated against DKK and CLP has depreciated against USD, then CLP has depreciated against DKK (logical rule)

Hence, the correct option is A. U.S.dollar has depreciated against the Danish Krone