ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -$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-2: -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-3: -it will take fewer dollars to purchase a pound. It the U.S. dollar appreciates, the relative value of the British pound will be decreased with respect to the value of U.S. dollars, so it will be required lesser amount of dollar to purchase same amount of British pound.

Detailed explanation-4: -Relative purchasing power parity (RPPP) is an economic theory that states that exchange rates and inflation rates (price levels) in two countries should equal out over time.