In July 2008, a British pound could buy $2. By October 2008, a pound could buy $1.55. Over the four months, the
A) pound depreciated against the dollar.
B) the real exchange rate did not change.
C) pound appreciated against the dollar.
D) the U.S. inflation rate increased.

Question

Quizplus · Accepted Answer

The value of the pound decreased from being able to purchase $2 to only $1.55 over the four-month period. This implies that the pound depreciated against the dollar. Option B is incorrect because there was a change in the exchange rates. Option C is incorrect because the pound lost value compared to the dollar, so it did not appreciate. Option D is unrelated to the exchange rate between the pound and the dollar, so it is incorrect.

In July 2008, a British Pound Could Buy $2