One year ago, the exchange rate between the pound and the dollar was £1=$1.50. The current exchange rate is £1=$1.49. During the year, the inflation rate was 5% in the U.K. and 7% in the US. Was there a change in the real exchange rate between the pound and the dollar? If your answer is yes, which currency gained in real terms?
a. Yes, the pound gained in real term.
b. Yes, the dollar gained in real term
c. No, there is no change in real exchange rate.