Which term represents currency value increasing?

• A. Appreciation
• B. Depreciation
• C. Inflation
• D. Deflation

Answer: (A)

When a currency gains value relative to other currencies, it has appreciated. This happens when your currency buys more foreign currency than before, or when it takes fewer units of your currency to get the same amount of foreign currency. In practice, if the domestic currency strengthens on the exchange market, that’s appreciation.

Inflation and deflation describe changes in price levels for goods and services within the economy, not the value of the currency itself. Depreciation is the opposite of appreciation—when the currency loses value relative to others. For example, if the dollar strengthens against the euro, the dollar has appreciated.