Exchange Rates
International Trade & Globalisation · 4 question types
Exam Frequency Analysis
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 task involves two operations.
Converting from one currency to another
Multiply (or divide) the amount by the exchange rate, depending on the direction of the conversion.
To convert a domestic price into a foreign currency, multiply by the number of units of foreign currency per unit of domestic currency. To convert a foreign price back, divide by the same rate.
Calculating the percentage change in an exchange rate
Percentage change = ((new rate − old rate) ÷ old rate) × 100.
A positive result is an appreciation; a negative result is a depreciation. For example, if the rate moves from £1 = $2.00 to £1 = $1.60, the change is ((1.60 − 2.00) ÷ 2.00) × 100 = −20%, a 20% depreciation that makes a £400 export fall from $800 to $640 for an overseas buyer.