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WorksheetsIGCSE Economics- Trade, BOP & Exchange Rates
Total questions: 100
Worksheet time: 1hrs 2mins
What is an exchange rate?
The rate at which goods are exchanged between two countries
The price of one nation's currency in terms of another's
How many US dollars you can exchange for RMB at Travelex
The price of goods in terms of a foreign currency
According to the table, what is the Euro equivalent of 1 USD?
1.32 Euros
0.53 Euros
.76 Euros
1.59 Euros
According to the table, what is the USD equivalent of 1 Australian?
0.97 USD
1.32 USD
1.28 USD
1.03 USD
How is an exchange rate determined in the money market?
The forces of supply and demand
Government/the Federal Reserve Bank
Whatever sellers of goods are willing to take
Investors decide the value of the currency they wish to invest
Why do changing exchange rates help one country and hurt the other?
One side loses purchasing power and the other gains it
Takes money away from one side and gives it to the other
Causes war between the two countries
One country's government introduces tariffs to protect local industries
What type of exchange rate system do most countries operate under?
Flexible
Floating
Fictitious
Fixed
What is the difference between a fixed rate exchange system and a floating rate system?
Government sets rate vs market sets rate
Doesn't exist vs does exist
Never changing vs always changing
Currency never appreciates vs can appreciate
If the US $ were to appreciate in relation to the Euro, what effect would this have?
European consumers would have more purchasing power in US
US consumers can buy more European goods and services for fewer $$
US consumers can buy more English goods and services for fewer $$
European tourists to the US will spend more $$
How does inflation rate affect currency value/exchange rate?
Higher inflation leads to depreciating currency & vice versa
Increasing inflation leads to more favourable exchange rates
Higher inflation leads to currency appreciation
Lower inflation leads to more favourable exchange rate
If the Mexican Peso depreciates in relation to the Chinese Yuan, how is Mexico affected?
Mexico has less purchasing power in Chinese currency
Mexico benefits from increased purchasing power
Mexico would have more Chinese investors
They would be invaded by China
The currency exchange rate of the South African rand for the Botswana pula fell by 5.7% between August 2014 and August 2015. What would be the immediate effect of this?
Botswana’s level of protection would fall.
Botswana’s tourists travelling to South Africa would find it less expensive
South Africa’s imports would be cheaper.
South Africa’s tourists travelling to Botswana would receive more pula per rand
What is likely to cause a rise in a country’s foreign exchange rate?
a fall in its exports of goods and services
a fall in its imports of goods and services
a fall in its inflow of income
a rise in its outflow of transfers
A developing country’s two major sources of income from international trade are fishing and tourism. If the country’s exchange rate depreciated, what is likely to happen?
Imported goods would become cheaper for local people.
The country would definitely become poorer.
The price of fish sold as exports would become cheaper.
Tourists to the country would be discouraged by higher prices.
When the US$ exchange rate falls it will usually
help to reduce a US trade deficit.
increase the foreign price of US exports.
reduce the price of US imports.
reduce US inflation
In 2009 the exchange rate of the Singapore dollar changed from 1.49 = 1 US dollar to 1.43 Singapore dollars = 1 US dollar.
How would this affect the import prices and export prices for Singapore?
decrease/decrease
decrease/increase
increase/decrease
increase/increase
What is an advantage of a floating exchange rate?
There is no advantadge
Interest rates are free to be employed to domestic goals
Reduced speculation from foreign investors
High consumer and business confidence
Which of these only has an indirect effect on exchange rates?
Higher domestic demand
Selling of foreign currency by private agents
Central banking selling foreign reserves
A depreciation of a country's currency means for this country's residents that imported goods are
Cheaper
More expensive
An appreciation of a country's currency means that for foreigners this country's goods are
Cheaper
More expensive
The impact of a country's exchange rate appreciation in its current account balance is
Negative
Positive
The impact of a country's exchange rate depreciation in its current account balance is
Negative
Positive
An increase of a country's interest rates should
Attract more capital flows
Lead to capital outflows
When a country is receiving more capital flows, this puts a pressure on exchange rates to
Depreciate
Appreciate
Higher interest rates
Make foreigners decide to buy more of a country's government bonds
Attracts portfolio flows to a country
Controls inflationary pressures
All the above
What is the increase in the value of a currency?
Exchange rate
Recession
Depreciation
Appreciation
What does it mean when an economist says a currency is stronger?
It can be exchanged for more of a lesser foreign currency
It can be converted to prices in any currency
There a few things it could buy
It will buy fewer foreign goods
What is a decrease in the value of a currency?
Appreciation
Depreciation
Inflation
Absolute advantage
If the AUD were to appreciate in the relation to the USD, what effect would this have?
Australian imports become cheaper.
Australian exports become more expensive to American buyers.
Australian imports become more expensive.
Australian exports become less expensive to American buyers.
If you are going to visit America and have $2999 to spend, how much currency could you obtain? (1AUD = 0.68USD)
= 1x 0.68
= 1 / 0.68
= 2999 x 0.68
= 2999 / 0.68
Change £500 into Australian Dollars.
If necessary, round your answer to 2 decimal places...
880
287.01
640
390.63
Change £1350 into Australian Dollars.
If necessary, round your answer to 2 decimal places...
2376
767.05
1728
1054.69
What is a decrease in the value of a currency?
appreciation
depreciation
exchange rate
inflation
Whats the relationship between the value of a country's exports and the value of its imports?
Trade Surplus
Balance of Trade
Trade Deficit
Appreciation
Depreciation
How do you convert U.S. Dollars into another country.
Multiply the exchange rate by # of units
Multiply the # of dollars by the # of units of the other currency, per dollar
Divide the exchange rate by the # of units of other currency
Divide # of dollars by # of units
What is the result of a nation exporting more than they import?
Trade Deficit
Trade Surplus
Balance of Trade
Trade War
What is the relationship between a nations imports and exports?
Free Trade
Trade Barrier
Trade Deficit
Balance of Trade
What is the result of a nation importing more than it exports?
Trade Surplus
Free Trade Zone
Trade Deficit
Trade Barrier
The exchange rate between 2 countries is determined by,
Supply and Demand
Inflation/Interest Rates
Balance Trade
Fixed Percentage
FOREX is
Foreign currency
Foreign country
a Share market
FOREX RATE is
Domestic currency
Value of domestic currency in terms of foreign currency
foreign currency
Under which system Demand and supply for FOREX determines the exchange rate
Flexible exchange rate
Fixed exchange rate
Both
Managed floating system is
flexible system of exchange rate
mixture of fixed exchange rate and fixed exchange rate
A system managed by a foreign country
Depreciation is
Fall in the value of domestic currency in terms of foreign currency
Rise in the value of domestic currency in terms of foreign currency
none
Devaluation is
Fall in the value of domestic currency in terms of foreign currency as a deliberate step adopted by the govt. under Fixed exchange rate system
Rise in the value of domestic currency in terms of foreign currency as a deliberate step adopted by the govt. under Fixed exchange rate system
Fall in the value of domestic currency in terms of foreign currency as a deliberate step adopted by the govt. under FLEXIBLE exchange rate system
Appreciation of domestic currency will
Encourage imports
Encourage Exports
Discourage imports
Under flexible system exchange rate is determined where
Demand for FOREX=Supply of FOREX
Demand for Forex > Supply of FOREX
By Government
Which of the following is a source of FOREX supply
Imports
Exports
Direct purchase in abroad
With a fixed exchange rate, an increase in the domestic price level will, for a constant foreign price level,
increase exports and decrease imports.
make foreign goods relatively more expensive to U.S. citizens but U.S. exports will be relatively cheaper to foreigner buyers.
increase both exports and imports.
make foreign goods relatively cheaper to U.S. citizens but U.S. exports will be more expensive to foreign purchasers.
A current account deficit in a nation's balance of payments accounts implies that
imports are equal to exports.
exports exceed imports.
expenditures are more than income
income is more than expenditures.
A supply of foreign exchange occurs in the United States when
a U.S. citizen wants sells stock on a European stock exchange.
the United States exports steel to Japan.
United States citizens travel abroad.
both a and c
all of above
What does it mean when an economist says a currency is stronger?
It can be exchanged for more of a lesser foreign currency
It can be converted to prices in any currency
There are few things it could buy
It will buy fewer foreign goods
What does it mean people say the £ is strong against the Euro?
The euro buys less pounds
The euro buys more pounds
The pound buys less euros
The pound buys more euros
If the pound is described as strong who benefits?
Exporting businesses
Small businesses
Importing businesses
Large businesses
If the pound is described as weak who benefits?
Small Businesses
Large Businesses
Importing Businesses
Exporting Businesses
Each row shows the equivalence of that country's currency compared to another. For example, 1 Euro would get you 1.2829 Australian Dollars or 0.8299 British Pounds.
According to the table, what is the Euro equivalent of 1USD?
1.32 Euros
0.53 Euros
.76 Euros
1.59 Euros
Change £500 into Swiss Francs.
If necessary, round your answer to 2 decimal places...
610
409.84
815
306.75
A floating exchange rate is a regime where the currency price is set by the
forex market based on demand for the currency compared with other currencies.
forex market based on supply and demand compared with other currencies.
central banking authority
the country who is trading with our country
What does it mean by Central Bank Intervention?
In floating exchange rate systems, central banks can only buy their local currencies to adjust the exchange rate
In floating exchange rate systems, central banks can only sell their local currencies to adjust the exchange rate
In floating exchange rate systems, central banks buy their trading partners currencies to adjust the exchange rate
In floating exchange rate systems, central banks buy or sell their local currencies to adjust the exchange rate
A fixed exchange rate is
where a currency's value is raced against either the value of another single currency.
where a currency's value is fixed against the value of gold only
where a currency's value is fixed against either the value of another single currency, to a basket of other currencies, or to another measure of value, such as gold.
where a currency's value is calculated against the value of another single currency
If one US dollar equals .5 British Pounds, you would receive ___ British Pounds if you exchanged $15.
1.5
7.5
5
15
How can the government of foreign country influence the equilibrium exchange rate?
impose forex barriers
Impose foreign trade barriers
Intervene by buying and selling currency
All above
What does appreciate mean?
to decrease in value
to increase in value
to remain the same in value
What does it mean to depreciate in value?
to gain in value
to remain the same in value
to fall in value
to gain value by 100 fold
If the US dollar increases in value compared with the Mexican peso, what has the dollar done?
depreciate
appreciate
contractionary policy
flexible exchange rate
The price of one country's currency against another is known as the __________.
Mortgage rate
Treasury bond rate
Stock Rate
Exchange Rate
For example in 2006 the dollar to the euro exchange rate was $1.40= e1.oo so you needed $1.40 to get 1e. Today the rate is $1.31 = 1e. What does this mean?
The euro has depreciated in value against the dollar
The euro has appreciated in value against the dollar
The value of the euro has remained the same against the dollar
A country’s ___________ are a summary of the country’s transactions with other countries.
Balance of Payments Accounts
Balance of Payments on the Current Account
Balance of Payments on Goods and Services
Balance of Payments on the Financial Account
The ___________, or ___________, is the difference between a country’s exports and imports of goods.
Merchandise Trade Balance; Trade Balance
Balance of Payments Accounts; Payment Balance
Balance of Payments on the Current Account; Current Account
Balance of Payments on the Financial Account; Financial Account
Currencies are traded in the ___________. The prices at which currencies trade are known as ___________.
Foreign Exchange Market; Exchange Rates
Merchandise Trade Balance; Trade Balance
Currency Market; Exchange Rates
Currency Exchange Market; Currency Rates
When a currency becomes more valuable in terms of other currencies, it ___________, and when it becomes less valuable in terms of other currencies, it ___________.
Appreciates; Depreciates
Decreases; Increases
Depreciates; Appreciates
A fall in the demand for U.S. exports would result in a rise in the exchange rate when
a. there is no capital mobility and exchange rates are allowed to float.
b. there is capital mobility.
c. exchange rates are allowed to float
d. the country has a balance of payments surplus.
both c and d.
What is the difference between nations exports and imports?
Balance of Trade
Real GDP
Comparative Advantage
Absolute Advantage
Who benefits from the depreciation of the Japanese yen relative to the Euro?
European consumers of European Goods
Japanese consumers of Japanese Goods
European consumers of Japanese Goods
Which is NOT an example of a trade barrier?
Tariff
NAFTA
Embargo
Quota
What argument for protection believes that new or emerging industries should be protected.
National Defense
Protecting domestic jobs
Infant Industry
Keeping money at Home
What is the key to trade?
Self-Sufficiency
Specialization
Technology
Wealth
Which Countries have a FIXED exchange rate system?
Democratic Republic of Congo
Rwanda
United Arab Emirates
China
Which countries have a FREE FLOAT exchange system?
Belgium
Cambodia
China
United Kingdom
