Econ T/F

Pound's purchasing power is greater than Dollar's if Exchange rate $/pounds > 1.
-I am thinking false but not sure, anyone agree with me?

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  1. The answer is True. Currently 2$ = 1 pound. The $/pound "exchange rate" is >1

    The pound/$ exchange rate is <1.

    You often see it expressed both ways.

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  2. but does it also depend on the goods in both countries? If a basket of goods is more expensive in UK, and less expensive in US, then the purchasing power of pound is not necessarily greater, is it?

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  3. I think false. The exchange rate generally equalizes purchasing power. That said, let me give an example. Say the exchange rate is $2=L1. (L for pounds). Now say a burger in the U.S. costs $2 and a similar burger in the U.K. costs L1. Here purchasing powers are the same. But the burger in the U.K. could cost L.9 or say, L1.1

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