Over the past five years the exchange rate between British p

Over the past five years, the exchange rate between British pound and U.S. dollar, $/£, has changed from about 1.60 to about 1.32. Would you agree that over this five-year period that British goods have become cheaper for buyers in the United States? Explain.

Solution

Yes, British goods are becoming cheaper for US buyers.

Reason / Explanation:

Exchange rate at beginning was $1.60 / £1, which means US buyers use to spend $1.60 to buy £1 of goods.

But, after 5 years US buyers are spending $1.32 to buy £1 of goods. This means US buyers are spending lesser now because Britain goods are becoming cheaper for them.