Exchange rates
6.4What the syllabus asks of you
- definition of exchange rate
- determination of a floating exchange rate
- distinction between depreciation and appreciation of a floating exchange rate
- causes of changes in a floating exchange rate: demand and supply of the currency
- AD/AS analysis of the impact of exchange rate changes on the domestic economy’s equilibrium national income and the level of real output, the price level and employment
Drill this topic
Every question on 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.
48 questions
1May / June 2026 · Paper 11 · Q28Show mark scheme →
Ait allows government more independence in policy making
Bit eliminates the instability of free markets
Cit gives firms more confidence in future costs and prices
Dit increases foreign exchange reserves
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2May / June 2026 · Paper 12 · Q26Show mark scheme →
Aan increase in the US imports
Ban increase in the US interest rate
Can increase in the US money supply
Dan increase in the US employment rate
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3May / June 2026 · Paper 12 · Q30Show mark scheme →
Aa decrease in the price levels of other countries
Ba depreciation of the pound sterling
Ca reduction in the level of UK import tariffs
Dan increase in UK interest rates
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4May / June 2026 · Paper 13 · Q30Show mark scheme →
Acurrent account of the balance of payments: improves; price level: decreases
Bcurrent account of the balance of payments: improves; price level: increases
Ccurrent account of the balance of payments: worsens; price level: decreases
Dcurrent account of the balance of payments: worsens; price level: increases
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5May / June 2026 · Paper 14 · Q29Show mark scheme →
Avalue of exports from M to N decreases | value of imports from N to M decreases
Bvalue of exports from M to N decreases | value of imports from N to M increases
Cvalue of exports from M to N increases | value of imports from N to M decreases
Dvalue of exports from M to N increases | value of imports from N to M increases
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6Oct / Nov 2025 · Paper 11 · Q26Show mark scheme →
AThere would be a decrease in structural unemployment.
BThere would be a decrease in the volume of exports.
CThere would be an increase in cost-push inflationary pressure.
DThere would be an increase in the budget deficit.
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7Oct / Nov 2025 · Paper 12 · Q28Show mark scheme →
AA
BB
CC
DD
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8Oct / Nov 2025 · Paper 14 · Q30Show mark scheme →
Achanges in the supply and demand for dollars and euros in the foreign exchange market
Bcontinuous appreciation of the US dollar throughout the period
Ccontinuous depreciation of the US dollar throughout the period
Drestraints placed by trade agreements on the rate of exchange
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9May / June 2025 · Paper 11 · Q30Show mark scheme →
Aincreased disinflation
Bincrease in cost-push inflation
Cmore purchasing power of money
Dreduced demand-pull inflation
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10May / June 2025 · Paper 12 · Q30Show mark scheme →
Aa decrease in European Union inflation
Ba decrease in US interest rates
Can increase in European Union imports
Dan increase in European Union unemployment
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11Feb / March 2025 · Paper 12 · Q27Show mark scheme →
AWhen its current account surplus exceeds that of its trading partners.
BWhen its inflation rate exceeds that of its trading partners.
CWhen its interest rate exceeds that of its trading partners.
DWhen its unemployment rate exceeds that of its trading partners.
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12Feb / March 2025 · Paper 32 · Q23Show mark scheme →
Aan increase in domestic inflation
Ban increase in domestic interest rates
Can increase in incomes abroad
Dan increase in tourists visiting the country
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13Oct / Nov 2024 · Paper 11 · Q27Show mark scheme →
Aeconomic growth
Binflation rate
Cmoney supply
Dtrade barriers
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14Oct / Nov 2024 · Paper 12 · Q24Show mark scheme →
AIt sells mainly abroad and relies on domestic suppliers for inputs.
BIt sells mainly abroad and relies on foreign suppliers for inputs.
CIt sells mainly in its home market and relies on domestic suppliers for inputs.
DIt sells mainly in its home market and relies on foreign suppliers for inputs.
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15Oct / Nov 2024 · Paper 12 · Q30Show mark scheme →
A6.91 6.90
B70.4 74.1
C14.4 16.5
D0.99 0.94
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16Oct / Nov 2024 · Paper 13 · Q30Show mark scheme →
Aa fall in the foreign currency price of its exports
Ba fall in the volume of its exports
Ca rise in the domestic currency price of its imports
Da rise in the domestic price level
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17May / June 2024 · Paper 11 · Q24Show mark scheme →
AIt makes it difficult to prioritise domestic economic policy aims.
BIt makes the prices of internationally traded goods less predictable.
CIt means that the government must keep significant foreign currency reserves.
DIt requires continuous government intervention in currency markets.
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18May / June 2024 · Paper 11 · Q28Show mark scheme →
Aa sustained fall in the demand for Turkish imports
Ba sustained fall in Turkish government debt as a percentage of GDP
Ca sustained rise in Turkish interest rates
Da sustained rise in Turkish inflation
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19Oct / Nov 2023 · Paper 31 · Q23Show mark scheme →
Adepreciation of the exchange rate — encourages more exports, which also means greater employment
Bhigher interest rates — attracts hot money inflows, and is an incentive for more consumer spending
Cdecreased government spending — more workers will be employed, and more imports will be bought
Dreduction in income taxes — increases consumer spending, with increased demand for exports
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20May / June 2023 · Paper 11 · Q25Show mark scheme →
Athe exports of capital from the country
Bthe level of employment in the country
Cthe prices of imports into the country
Dthe value of the country's currency
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21May / June 2023 · Paper 32 · Q26Show mark scheme →
Aprice of imported goods in the domestic currency: fall; price of exported goods in the domestic currency: fall
Bprice of imported goods in the domestic currency: fall; price of exported goods in the domestic currency: rise
Cprice of imported goods in the domestic currency: rise; price of exported goods in the domestic currency: fall
Dprice of imported goods in the domestic currency: rise; price of exported goods in the domestic currency: rise
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22Feb / March 2023 · Paper 12 · Q17Show mark scheme →
AThe £ appreciated against the US$ and depreciated against the €.
BThe £ appreciated against the US$ and the €.
CThe £ depreciated against the US$ and appreciated against the €.
DThe £ depreciated against the US$ and the €.
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23Feb / March 2023 · Paper 12 · Q22Show mark scheme →
Aa fall in its direct taxes
Ba fall in its export orders
Ca rise in its interest rates
Da rise in its imports
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24Feb / March 2023 · Paper 12 · Q23Show mark scheme →
AThe US government reduces subsidies on exports to the EU.
BForeign currency speculators in Switzerland believe that the US$ is undervalued and act accordingly.
CThe US government intervenes in the foreign exchange market so as to bring about a drop in the value of the US$.
DUS pharmaceutical companies experience a fall in demand for their products from the rest of the world.
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25Oct / Nov 2022 · Paper 11 · Q20Show mark scheme →
Aintroduce controls on Chinese investment overseas
Blower interest rates
Cremove tariffs on imports from USA
Dsell Yuan on the foreign exchange markets
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26Oct / Nov 2022 · Paper 11 · Q25Show mark scheme →
Aan increase in demand-pull inflation
Ban increase in national income
Ca decision of the central bank to raise money supply
Da discovery of a natural resource that replaces imports
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27Oct / Nov 2022 · Paper 12 · Q24Show mark scheme →
Aa rise in the foreign currency price of its exports
Ba rise in the volume of its exports
Ca fall in the domestic currency price of its imports
Da fall in the domestic price level
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28Oct / Nov 2022 · Paper 12 · Q26Show mark scheme →
AIt will increase.
BIt will decrease.
CIt will be unchanged.
DIt will depend on the elasticity of demand for the manufacturer’s good in the US.
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29May / June 2022 · Paper 11 · Q19Show mark scheme →
Adecrease / decrease
Bdecrease / increase
Cincrease / decrease
Dincrease / increase
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30May / June 2022 · Paper 11 · Q26Show mark scheme →
AImpose tariffs on imported goods with price-inelastic demand.
BIncrease interest rates.
CReduce income tax.
DSell the currency on the foreign exchange markets.
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31May / June 2022 · Paper 11 · Q27Show mark scheme →
Awhen the currency of the economy is expected to lose its value
Bwhen the economy is politically and economically stable
Cwhen the interest rate of the economy is higher than that of other countries
Dwhen the reserves of foreign currencies held by the central bank are high and rising
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32May / June 2022 · Paper 12 · Q23Show mark scheme →
Aa decrease in the country's inflation rate relative to the inflation rates of other countries
Ba decrease in the tariffs on its products imposed by other countries
Can increase in its current account balance of payments deficit with other countries
Dan increase in the country's interest rate relative to the interest rates of other countries
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33May / June 2022 · Paper 12 · Q30Show mark scheme →
Adepreciating its currency
Bhigher direct taxation
Chigher import tariffs
Dhigher interest rates
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34May / June 2022 · Paper 13 · Q26Show mark scheme →
AA
BB
CC
DD
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35May / June 2022 · Paper 13 · Q27Show mark scheme →
AJapan has a lower opportunity cost in electrical component production than its Asian competitors.
BJapan has experienced greater deflation than its Asian competitors.
CJapan has imposed tariffs on the import of electrical components from its Asian competitors.
DThe Japanese Yen has appreciated against the currencies of its Asian competitors.
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36May / June 2022 · Paper 14 · Q22Show mark scheme →
AUK interest rate falls below US interest rate.
BThe demand for UK exports is price-elastic and prices increase.
CThe demand for US exports is price-elastic and prices decrease.
DPeople believe that sterling will appreciate.
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37May / June 2022 · Paper 14 · Q25Show mark scheme →
Aprice elasticity of demand: elastic; price elasticity of supply: elastic
Bprice elasticity of demand: inelastic; price elasticity of supply: elastic
Cprice elasticity of demand: elastic; price elasticity of supply: inelastic
Dprice elasticity of demand: inelastic; price elasticity of supply: inelastic
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38May / June 2022 · Paper 14 · Q26Show mark scheme →
Athe budget deficit
Bthe general price level
Cthe interest rate
Dthe trade deficit
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39Oct / Nov 2021 · Paper 12 · Q26Show mark scheme →
ABoth the price elasticities of supply for its imports and its exports must be elastic.
BThe importing country will buy all the excess supplies of its trading partner to clear the market.
CThe sum of the price elasticities of domestic demand for imports and the foreign demand for exports must be greater than one.
DThe trading partners need to agree on the maximum prices to be charged for imports and exports.
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40Oct / Nov 2021 · Paper 13 · Q25Show mark scheme →
Aemployment levels
Bincome levels
Cinterest rates
Dprice levels
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41May / June 2021 · Paper 11 · Q21Show mark scheme →
ALocal people bought more imported goods because they were cheaper.
BThe price of fish sold in foreign markets became cheaper.
CThe volume of exports decreased.
DTourists to the country were discouraged by higher prices.
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42May / June 2021 · Paper 11 · Q22Show mark scheme →
Ato attract more tourists into the country
Bto improve the current account of the balance of payments in the long run
Cto increase inflation if the country is in recession
Dto make imported raw materials cheaper
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43May / June 2021 · Paper 11 · Q29Show mark scheme →
AThe combined income elasticity of demand for exports and imports is +2.0.
BThe combined income elasticity of demand for exports and imports is +0.2.
CThe combined price elasticity of demand for exports and imports is –2.0.
DThe combined price elasticity of demand for exports and imports is –0.2.
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44May / June 2021 · Paper 12 · Q20Show mark scheme →
Ato improve the terms of trade
Bto increase the level of aggregate demand
Cto reduce a current account surplus
Dto reduce demand-pull inflation
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45May / June 2021 · Paper 12 · Q27Show mark scheme →
Aappreciate; decrease
Bappreciate; increase
Cdepreciate; decrease
Ddepreciate; increase
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46May / June 2021 · Paper 13 · Q21Show mark scheme →
Adecrease / decrease
Bdecrease / increase
Cincrease / decrease
Dincrease / increase
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47Feb / March 2021 · Paper 12 · Q21Show mark scheme →
AIts central bank would have to intervene more frequently in the foreign exchange market.
BIts central bank would need to hold fewer foreign currency reserves.
CThe value of its currency would be determined by its major trading partners.
DThe value of its currency would be determined by the value of the US dollar.
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48Feb / March 2021 · Paper 12 · Q22Show mark scheme →
AThe price of imported goods in the domestic currency will fall.
BThe price of imported goods in the domestic currency will rise.
CThe price of imported goods in the foreign currency will fall.
DThe price of imported goods in the foreign currency will rise.
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