Question

We noted that in 1900, the fixed exchange rate between the British pound and the U.S. dollar was £1 equals $5. What is the exchange rate today? Whose currency has gained the most in purchasing power? What caused this dramatic change in the exchange rate?

Answer 1

The current value of £1 = 1.29 Dollars,

it illustrates the over the period of times, the currency £ has depreciated. in other words, the dollar has appreciated considerably during this period.

US currency has gained most in purchasing power over the past few decades. the value of currency depends on its economic system. US economy has grown massively over the past few decades. While the UK economy is considerably is less than the size of the US economy. It has led to the rise in the demand for dollars in the international market. Now all transactions are being performed through the US dollar. Hence, the £1 has decreased in its value or depreciated significantly,

Further inflation rate also drags down the value of a currency. Inflation rate in UK has been relatively