Economics (AS & A Level) · May / June 2026 · Paper 12 · Question 30

In the diagram, D₁ and S₁ are the initial supply and demand curves of the pound sterling (£) on the foreign exchange markets. [Diagram: axes labelled 'price of £ (in $)' vertically and 'quantity of £' horizontally, origin O. Downward-sloping demand curves D₁ and D₂ (D₂ below/left of D₁). Upward-sloping supply curves S₁ and S₂ (S₂ below/right of S₁).] What will cause the demand curve to shift to D₂ and the supply curve to S₂?

1. Aa decrease in the price levels of other countries
2. Ba depreciation of the pound sterling
3. Ca reduction in the level of UK import tariffs
4. Dan increase in UK interest rates

As printed in the paper