6.
3 Foreign exchange rates
1. Define a floating foreign exchange rate. [2] MJ2019/P21Q2a
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2. Define a foreign exchange rate. (2) TB
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3. Define devaluation. (2) TB
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4. Explain two causes of a depreciation in a foreign exchange rate. (4) TB
5. Explain two reasons why a country’s foreign exchange rate may depreciate. [4]
6. Explain two ways a central bank can prevent a rise in a fixed exchange rate. (4) TB
7. Analyse how a recession in Country X could affect Country Y’s floating exchange rate. (6) TB
8. Discuss whether or not a fall in a country’s rate of interest will reduce its foreign exchange
rate. (6) TB
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9. Analyse how a fall in a country’s foreign exchange rate could increase its inflation rate. [6]
10. Analyse how a fall in a country’s foreign exchange rate could increase employment. [6]
11. Analyse how a fall in the value of a country’s foreign exchange rate could reduce a deficit on
the current account of its balance of payments. [6]
12. Discuss whether or not a fall in its foreign exchange rate will improve a country’s
macroeconomic performance. [8]
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13. Explain two causes of an increase in the value of a country’s floating foreign exchange rate. [4]
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14. Discuss whether or not having a strong foreign exchange rate is a problem for Greece’s
economy. [6]
15. Discuss whether or not an appreciation of a country’s domestic currency will have negative
effects on its economy. [8]
16. Discuss whether or not a rise in a country’s foreign exchange rate would benefit its economy. [8]
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17. Explain two differences between a floating foreign exchange rate and a fixed foreign exchange
rate. [4]
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18. Discuss whether or not a country should switch from a fixed foreign exchange rate system to a
floating foreign exchange rate system. [8] ON2020/P22/Q5d
19. Discuss whether or not a country would benefit from switching from a fixed to a floating
exchange rate. (8) TB
20. Discuss whether or not a country will benefit from having a fixed foreign exchange rate system. [8]
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