Question

If the exchange rate at the end of the year is £1 = $1.25, will the dollar have appreciated or depreciated against the pound?

1) The dollar will have appreciated against the pound
2) The dollar will have depreciated against the pound

Answer 1

If the exchange rate at the end of the year is £1 = $1.25, then the dollar will have appreciated against the pound.

Step-by-step explanation:

If the exchange rate at the end of the year is £1 = $1.25, then the dollar will have appreciated against the pound.

To understand this, think about it in terms of how much the pound can buy with respect to the dollar. If the exchange rate increases from £1 = $1 to £1 = $1.25, it means that the pound has become weaker, and thus the dollar has become stronger.

For example, let's say you have £100. At the earlier exchange rate of £1 = $1, you would get $100. But at the new exchange rate of £1 = $1.25, you would get $125 for your £100, which shows that the dollar has appreciated against the pound.