Exchange Rates (Edexcel IGCSE Economics): Exam Questions

Figure 3 shows the supply of and demand for UK pounds (£), as well as the equilibrium exchange rate against the euro (€). UK interest rates increased from 4% to 4.25% in March 2023.

Using the diagram below, draw the likely effect of this rise in UK interest rates on the equilibrium exchange rate of the UK pound (£) against the euro (€). Label the new curve, the new equilibrium exchange rate and the new equilibrium quantity.

Figure 5 shows the adult entry fee into the Corcovado National Park in Costa Rica and the current exchange rate between the British pound (£) and the Costa Rican colón (CRC).

Figure 5

Calculate, to two decimal places, the price in British pounds (£) of a park entry fee for 1 adult into the Corcovado National Park. You are advised to show your working.

Which one of the following is a rise in the value of an exchange rate in a floating exchange rate system?

Figure 3 shows the supply of and demand for UK pounds (£) and the equilibrium exchange rate against the US dollar ($).

Using the diagram below, draw the likely effect of a decrease in imports from the US on the equilibrium exchange rate of the UK pound (£) against the US dollar ($). Label the new curve, the new equilibrium exchange rate and the new equilibrium quantity.

In 2020, 2% of US exports went to Australia. The main categories of goods exported included machinery, vehicles, medical instruments and aircraft. The US dollar ($) depreciated against the Australian dollar (AUD) in 2020.

With reference to the data above and your knowledge of economics, assess the likely impact on the demand for US exports to Australia after the depreciation of the US dollar.

Calculate the price in euros (€) of a UK manufactured car priced at £15000 when the exchange rate is £1 = €1.10. You are advised to show your working.

If the exchange rate changes from £1 = $1.40 to £1 = $1.30 then

What is the main reason for a government to devalue its currency?

Figure 2 shows the supply of and demand for UK pounds (£) in terms of US dollars ($) and the equilibrium exchange rate.

Using the diagram below, draw the effect of an increase in UK exports to the US on the equilibrium exchange rate of the UK pound (£). Label the new curve, the new equilibrium exchange rate and the new equilibrium quantity.

How many UK pounds (£) can be bought with $50 if the exchange rate is $1 = £0.75?

Figure 3 shows the supply of and demand for the UK pound (£) in terms of US dollars ($) and the equilibrium exchange rate.

Using the diagram below, draw the effects on the exchange rate of the UK pound (£) from an increase in UK exports to the US. Label the new curve, the new equilibrium exchange rate and the new equilibrium quantity.

A decrease in the exchange rate caused by government intervention is known as

An appreciation in a country’s exchange rate is most likely to lead to which one of the following?

In August 2019 Inter Milan, an Italian football club, paid £73m to Manchester United for the transfer of footballer Romelu Lukaku. The exchange rate was £1 = €1.08.

Calculate the price Inter Milan paid in euros (€) for the transfer of Romelu Lukaku. You are advised to show your working.

A depreciation in a country’s exchange rate is most likely to lead to which one of the following?

A government can try to stop its exchange rate from appreciating by

In an exchange rate system without government intervention, a rise in the exchange rate is known as

Calculate the price in Indian Rupees (INR) of machinery which costs $150 000 when the exchange rate is $1 = 70.66 INR. You are advised to show your working.

Figure 1 shows the supply and demand of the pound (£) in terms of the euro (€).

Using the diagram below, draw the effects on the exchange rate of the pound (£) of a decrease in UK exports to Eurozone countries. Label the new curve, the new equilibrium exchange rate and the new equilibrium quantity.

What is meant by the term revaluation?

In an exchange rate system with no government intervention, a decrease in the exchange rate is known as

The demand for the US$ changed following the publication in 2019 of the latest US growth rate report.

Analyse the impact of currency speculators on the supply and demand of the currency for a country such as the US.

What is meant by the term exchange rate?

In 2018, Germany had a current account surplus of €268bn. Germany uses the euro (€) which had recently weakened against other major currencies.

Explain one reason why a fall in the value of the euro (€) may have resulted in a positive impact on Germany’s current account.

In 2018, the Indonesian rupiah depreciated to its lowest levels since 1997 against other major currencies.

This depreciation is likely to have caused

Rachel buys a t-shirt for 1 000 Kenyan shillings (KES) when she is on holiday.
The exchange rate is £1 = 137.73 KES.

Calculate, to two decimal places, the price in sterling (£) of Rachel’s t-shirt. You are advised to show your working.

In October 2017 the currency of the Philippines, the peso, fell to its lowest level against the US dollar in more than 11 years.

Explain one advantage of having a depreciating currency for an economy such as the Philippines.

The UK exports goods to eurozone countries. Using the diagram below, draw the effects of an increase in exports from the UK to the eurozone on the exchange rate of the £. Label the new curve, the new equilibrium exchange rate and the new equilibrium quantity.

In December 2017 the Thai baht appreciated to its highest value in 2 years against the US dollar. The Thai baht is predicted to continue its gradual appreciation in 2018.

Explain one disadvantage of an appreciating currency for an economy such as Thailand.