Suppose you live in the United States and plan a vacation in London. You want to

Question

Suppose you live in the United States and plan a vacation in London. You want to find the least expensive airfare ticket, so you request quotes from Independence Airline (a U.S. airline) and Queen's Airways (a U.K. airline). The following table shows the quoted prices in national currencies. Suppose that the current exchange rate, or dollar price per pound, is . Airline Price Independence Airline $1,300 Queen's Airways £600 To compare the prices of the two tickets, you need to express them in a common currency. The price of the Queen's Airways ticket in dollars is . Therefore, the ticket is cheaper for you to buy. Your friend travels to London a month later. At the time he buys his airfare ticket, the prices quoted by the two airlines are the same as before, but the exchange rate, or dollar price per pound, has risen to . Assuming that your friend is looking for the least expensive deal, he will travel with . In this scenario, the U.S. dollar against the British pound. As a result, the dollar price of an airplane ticket sold by a U.K. company . Since the same logic applies to other goods and services, you can say that U.K. goods and services became expensive to U.S. consumers.

Explanation / Answer

current exchange rate is :1 pound = 1.5 dollar

Queen's airways = 600*1.5 = $ 900

Thus, Queen airways is cheaper.

Rise in dollar price per pound means pound is decpreciating, i.e it becomes more costly.

Then he will travel with Independence airline.

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