Question

After some troubling times in Egypt, American tourists are visiting in record numbers. As a result, demand for Egyptian pounds will _____ which means its value will _____ against the U.S. dollar, all else equal.

a) increase; depreciate

b) increase; appreciate

c) decrease; depreciate

d) decrease; appreciate

Answer 1

The answer is B, Increase, appreciate.

After some troubling times in Egypt, Americans tourist are visiting in record numbers. As a result, demand for Egyptian Pound will Increase, which means its value will Appreciate against the US Dollar.

When tourists from America visit Egypt, they will buy the pound, for different use like hotel booking, meals, conveyance, shopping etc, in exchange of their home country's money, that is Dollar, which means, they are demanding Pound by giving their dollars. So Egyptian Pound demand will increase and its value will appreciate against US Dollar.

Answer 2

The correct answer is b) increase; appreciate.
Since more and more people go in the country, more and more money will be required and produced. Since this money will not be surplus in the economy of the country they will gradually increase their value because of the growing demand for them, thus competing with the values with the other currencies, like the American Dollar (USD).