While vacationing in Agra, India, the price of one night's stay at your hotel room rises from 6600 rupees to 7200 rupees. If the exchange rate was previously 55 rupees per dollar, what would the exchange rate need to be now in order for the number of dollars you pay for your room to remain the same? Does this imply the rupee depreciated or appreciated against the dollar?
At an exchange rate of 55 rupees the room cost 120 dollars a night. To maintain the price in dollars at 120, the exchange rate would need to have risen to 60 rupees a dollar. If this were the case the rupee would have depreciated against the dollar.
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