ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Answer and Explanation: The correct answer is option C) appreciated; depreciated. If the value of 1 British pound changes from $1.25 to $1.50, one will have to spend more amount of U.S. dollars to purchase the same amount of British pound.

Detailed explanation-2: -When the value of the British pound changes from $1.50 to $1.25, then. the pound has appreciated and the dollar has appreciated.

Detailed explanation-3: -$1/€1 → $1.20/€1 means that the dollar has depreciated relative to the euro. It now takes $1.20 to buy one euro, so that the dollar is less valuable. The euro has appreciated relative to the dollar: it is now more valuable.

Detailed explanation-4: -depreciated; appreciated. When the value of the dollar changes from 0.5 pounds to 0.75 pounds, it implies that one has to spend more amount of pounds to purchase the same amount of dollars. Hence, we can say that the British pound has depreciated and the U.S. dollar has appreciated.

Detailed explanation-5: -In short, your money is worth more when the value of the pound is high. When the value of the pound falls, it becomes more expensive to buy goods from overseas, which causes inflation to rise. The more expensive things are, the less spending power your cash has.