Sia
Question
Microeconomics
Posted 9 months ago
The international quidditch tournament is being held in Ghana. The currency of Ghana is the cedi.
If the cedi has depreciated, what does that mean for tourists heading to Ghana to watch the tournament?
Choose 1 answer:
(A) Ghanian goods will be relatively more expensive to tourists
B) It will take less of their currency to buy the cedi
(c) The exchange rate of other currencies relative to the cedi has decreased
(D) Ghana's price level has decreased
(E) The exchange rate of the cedi has increased
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Answer from Sia
Posted 9 months ago
Solution
a
Depreciation of Currency: When a currency depreciates, it loses value relative to other currencies. This means that it takes more of a foreign currency to purchase the same amount of the depreciated currency
b
Impact on Tourists: For tourists, this depreciation means that they will need to spend more of their own currency to buy the same amount of cedi. Consequently, the cost of goods and services in Ghana, when converted back to their home currency, will appear higher
Answer
(A) Ghanian goods will be relatively more expensive to tourists
Key Concept
Currency Depreciation
Explanation
When the cedi depreciates, it takes more foreign currency to buy the same amount of cedi, making Ghanaian goods and services more expensive for tourists.
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