CIMA BA1 · Chapter 3 · Question 5 of 10
The exchange rate between the Ruritanian krona (RK) and the US dollar moves from RK1 = $0.80 to RK1 = $0.72. Which of the following statements is correct?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The krona has depreciated, making Ruritania's exports cheaper in dollar terms
Explanation
One krona now buys fewer dollars ($0.72 rather than $0.80), so the krona has depreciated. Goods priced in krona cost foreign buyers fewer dollars, while imports priced in dollars cost more krona.
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