GBP/USD how is that applied to ppl living in GB?

Question

let's say I worked at GB with 50k GBP salary, and GBP/USD is 1.50. After 3 years, my salary increased to 70k, and GBP/USD jumps to 2.00. Does that mean that my purchasing power has gone up not just 20k, but it has gone up to about 100k. And this means, I can import a shitload of goods from the US with a decent salary?

Answer 1

You would have to use purchasing power parity to observe if purchasing power has been increased

(1+inflation (lb ster)/1+inflation (USD)*spot rate) = forward rate

since prices are "sticky" you could probably be able to purchase more of the same goods from the U.S. than the same goods in the U.K.