Assuming that the value of 1 Ghana cedis as at today is equal to $0.4100, two...

Assuming that the value of 1 Ghana cedis as at today is equal to $0.4100, two days ago the value of the Ghana cedis was GHC1 to $0.3800.

i.calculate the percentage changed of the dollar in cedis.

ii.Explain two factors that could have affected this change

Solutions

Expert Solution

1. In this example, the Percentage change of dollar in cedis

= Change in the Exchange rate of Cedis/USD / Value of Ghana Cedis to USD as on today

= (0.3800 - 0.4100) / 0.4100

= -0.03 / 0.4100

= -7.3170%

The negative sign shows that the USD Currency is depreciating as compared to the Ghana Cedis.

2. There are several reason for the depreciation of the currency

Depreication of the currency refers to when the value of one currency relatively falls as compared to the other currency.

1. Inflation : It refers to the general increase in the prices of goods and services, when the inflation rate soars the country has to change the interest rate to bring the price to the same level and it reduces the value of the currency at the same time as you would be able to purchase less quantity as compared to earlier. Therefore, it results in the depreciation of the currency.

2. Interest rate : When the interest rate is higher in the country it attracts the foreign investors and push people to save more while the lower interest rate tends to promote spending, therefore, it affects the exchnage rate.

jeff jeffy answered 1 year ago

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