Foreign exchange rates
6.3What the syllabus asks of you
- Definition of foreign exchange rate
- Reasons for buying and selling foreign currencies: trade in goods and services
- Reasons for buying and selling foreign currencies: speculation
- Reasons for buying and selling foreign currencies: government intervention in currency markets
- Reasons for buying and selling foreign currencies: payment of profit, interest and dividends between countries
- Reasons for buying and selling foreign currencies: workers’ remittances
- Reasons for buying and selling foreign currencies: investment in capital goods between countries
- Determination of foreign exchange rate in foreign exchange market: definitions of floating exchange rate, appreciation and depreciation
- Determination of foreign exchange rate in foreign exchange market: the demand for and supply of a currency
- Determination of foreign exchange rate in foreign exchange market: the determination of the equilibrium foreign exchange rate
- Determination of foreign exchange rate in foreign exchange market: causes of foreign exchange rate fluctuations; changes in demand for exports and imports; changes in the interest rate; speculation
- Consequences of changes in foreign exchange rates: effects of changes in foreign exchange rates on prices and demand for exports and imports
Read the notes first
Chapter 6: Foreign exchange rates
Drill this topic
Every question on Foreign exchange rates, untimed, marked as you go.
Make a worksheet
Choose the years and how many questions, then print it with the answers on separate pages.
37 questions
1May / June 2026 · Paper 11 · Q29Show mark scheme →
AIt gives greater freedom to change the interest rate.
BIt helps determine the market value of a currency.
CIt provides greater certainty and stability.
DIt reduces the requirement to keep foreign exchange reserves.
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2May / June 2026 · Paper 12 · Q29Show mark scheme →
Athe central bank sets an inflation target
Bthe government sets prices in the markets for goods
Cthe money in the economy buys the same quantity of goods each year
Dthe value of the currency is fixed against another currency
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3Oct / Nov 2025 · Paper 12 · Q29Show mark scheme →
Aexport revenue: decreases; import expenditure: decreases
Bexport revenue: decreases; import expenditure: increases
Cexport revenue: increases; import expenditure: decreases
Dexport revenue: increases; import expenditure: increases
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4Oct / Nov 2025 · Paper 13 · Q29Show mark scheme →
Ademand for Pakistan's exports decrease, Pakistan's demand for imports decrease
Bdemand for Pakistan's exports decrease, Pakistan's demand for imports increase
Cdemand for Pakistan's exports increase, Pakistan's demand for imports decrease
Ddemand for Pakistan's exports increase, Pakistan's demand for imports increase
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5May / June 2025 · Paper 11 · Q29Show mark scheme →
Abuy XY yuan
Bbuy XZ yuan
Csell XY yuan
Dsell XZ yuan
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6May / June 2025 · Paper 12 · Q27Show mark scheme →
A$5
B$25
C$100
D$500
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7May / June 2025 · Paper 12 · Q29Show mark scheme →
Adirect tax rates
Bexchange rates
Cinflation rates
Dlevel of import tariffs
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8Oct / Nov 2024 · Paper 12 · Q29Show mark scheme →
Aan alternative method of trade protection
Bthe determination of the exchange rate in a fixed exchange rate system
Cthe determination of the exchange rate in a floating exchange rate system
Dthe increasing globalisation of international trade
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9Oct / Nov 2024 · Paper 13 · Q29Show mark scheme →
Aa decrease in the rate of inflation in India
Ban increase in demand for imports by people in India
Cgreater foreign direct investment into India
Dgreater purchases of its own currency by the Indian central bank
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10May / June 2024 · Paper 11 · Q29Show mark scheme →
Aa fall in Chinese interest rates
Ba fall in US interest rates
Ca faster growth rate in the US economy
Da reduction in the US government budget deficit
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11May / June 2024 · Paper 12 · Q28Show mark scheme →
Aa decrease in foreign direct investment in China
Ba decrease in the level of tariffs levied by China on imports
Can increase in the buying of yuan by central banks
Dan increase in the Chinese rate of interest
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12May / June 2024 · Paper 12 · Q29Show mark scheme →
Adecreased cost-push inflation
Bdecreased current account deficit
Cincreased quantity of imports
Dincreased trade deficit
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13Oct / Nov 2023 · Paper 12 · Q18Show mark scheme →
ADevaluing the currency would increase the cost of production.
BDevaluing the currency would increase the confidence of investors.
CDevaluing the currency would increase the foreign demand for domestic products.
DDevaluing the currency would increase the demand for imports.
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14Oct / Nov 2023 · Paper 12 · Q29Show mark scheme →
ADemand for imports increases.
BDomestic interest rates rise.
CDomestic savings increase.
DMore tourists visit the country.
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15May / June 2023 · Paper 11 · Q29Show mark scheme →
A$5
B$25
C$100
D$500
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16May / June 2023 · Paper 12 · Q29Show mark scheme →
Aa decrease in its inward investment
Ba decrease in its rate of interest
Can increase in its exports
Dan increase in its imports
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17May / June 2022 · Paper 11 · Q27Show mark scheme →
Athe difference between emigration and immigration
Bthe difference between the values of imports and exports
Cthe price of one currency in terms of another
Dthe price of one good in terms of another
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18May / June 2022 · Paper 12 · Q27Show mark scheme →
Aappreciation
Bdepreciation
Cdevaluation
Drevaluation
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19May / June 2022 · Paper 12 · Q29Show mark scheme →
AA trade in goods surplus will fall.
BExport prices will rise.
CImport prices will rise.
DThe inflation rate will fall.
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20Oct / Nov 2021 · Paper 12 · Q30Show mark scheme →
Aa fall in the money supply
Ban increase in purchasing power
Ccheaper imports
Dmore competitive exports
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21Oct / Nov 2021 · Paper 13 · Q30Show mark scheme →
Aa fall in the money supply
Ban increase in purchasing power
Ccheaper imports
Dmore competitive exports
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22May / June 2021 · Paper 11 · Q29Show mark scheme →
AUS$20 000
BUS$22 500
CUS$25 000
DUS$27 500
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23May / June 2021 · Paper 12 · Q29Show mark scheme →
AThe exchange rate appreciates and causes export prices to fall.
BThe exchange rate appreciates and causes export prices to rise.
CThe exchange rate depreciates and causes export prices to fall.
DThe exchange rate depreciates and causes export prices to rise.
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24May / June 2020 · Paper 12 · Q28Show mark scheme →
Aprices of imports of raw materials cheaper; prices of exports of manufactured goods cheaper
Bprices of imports of raw materials cheaper; prices of exports of manufactured goods more expensive
Cprices of imports of raw materials more expensive; prices of exports of manufactured goods cheaper
Dprices of imports of raw materials more expensive; prices of exports of manufactured goods more expensive
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25May / June 2019 · Paper 11 · Q28Show mark scheme →
Aa rate at which exports are exchanged for imports
Ba rate determined by the demand and supply of the currency
Ca value of a currency as fixed by the government
Da value of a currency expressed in terms of another currency
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26May / June 2019 · Paper 12 · Q28Show mark scheme →
Agreater demand for US$; value increases
Bgreater supply of US$; value falls
Cless demand for US$; value falls
Dless supply of US$; value increases
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27Oct / Nov 2018 · Paper 12 · Q29Show mark scheme →
Aimports: price decreases; exports: value decreases
Bimports: price decreases; exports: value increases
Cimports: price increases; exports: quantity decreases
Dimports: price increases; exports: quantity increases
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28May / June 2018 · Paper 11 · Q29Show mark scheme →
Aa decrease in tariffs on imports
Ba decrease in the price of exports
Ca decrease in the price of imports
Da decrease in the volume of exports
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29May / June 2018 · Paper 12 · Q29Show mark scheme →
AExports to South Africa became more expensive.
BThe current account deficit of the US decreased.
CThe US experienced higher levels of inflation.
DUnemployment in the US decreased.
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30Oct / Nov 2017 · Paper 12 · Q28Show mark scheme →
Athe balance of trade
Bthe exchange rate
Cthe relative inflation rate
Dthe supply of money
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31Oct / Nov 2017 · Paper 12 · Q30Show mark scheme →
AThe Argentine peso appreciated against the UK pound.
BThe Argentine peso depreciated against the euro.
CThe euro depreciated against the UK pound.
DThe South African rand appreciated against the euro.
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32Oct / Nov 2017 · Paper 13 · Q28Show mark scheme →
Aappreciation
Bdepreciation
Cdevaluation
Drevaluation
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33May / June 2017 · Paper 11 · Q27Show mark scheme →
Adevaluation
Bembargoes
Cquotas
Dtariffs
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34May / June 2017 · Paper 11 · Q30Show mark scheme →
AChina paid less in foreign currencies for imports.
BChina reduced its demand for oil and minerals.
CChina’s exports became less competitive.
DChina’s trading partners improved their balance of trade with China.
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35May / June 2017 · Paper 12 · Q27Show mark scheme →
Adevaluation
Bembargoes
Cquotas
Dtariffs
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36Oct / Nov 2016 · Paper 13 · Q30Show mark scheme →
Aprices paid by Singapore for imports: decrease; prices paid to Singapore for exports: decrease
Bprices paid by Singapore for imports: decrease; prices paid to Singapore for exports: increase
Cprices paid by Singapore for imports: increase; prices paid to Singapore for exports: decrease
Dprices paid by Singapore for imports: increase; prices paid to Singapore for exports: increase
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37May / June 2016 · Paper 12 · Q30Show mark scheme →
AA
BB
CC
DD
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