International Trade & Globalisation · 4 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 11% of your exam marks.
Exchange rate definitions, depreciation/appreciation effects on exports, imports, and inflation are increasingly examined since 2021.
A common 2- or 3-mark exam question. Two operations.
Multiply (or divide) the amount by the exchange rate, depending on direction.
Example — the exchange rate is £1 = $1.25.
£100 × 1.25 = \$125.\$250 ÷ 1.25 = £200. (Equivalently, multiply by the inverse: 1 ÷ 1.25 ≈ 0.80, so $250 × 0.80 = £200.)The trick is to read the rate carefully. "£1 = $1.25" means one pound buys $1.25; the rate is 1.25 dollars per pound. To go from pounds to dollars, multiply by 1.25; to go back, divide by 1.25.
Percentage change = ((new rate − old rate) ÷ old rate) × 100.
Example — the exchange rate moves from £1 = $1.50 to £1 = $1.25.
The pound has depreciated by about 16.7% against the dollar: each pound now buys fewer dollars.
A common slip: dividing by the new rate instead of the old rate. Always use the old rate as the denominator for percentage changes.
A second common slip: forgetting that a fall in the quoted rate (£1 = $1.50 to £1 = $1.25) means the pound has depreciated and the dollar has appreciated. Whichever currency loses value, the other gains. Read the direction of the rate quotation carefully.