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.
Four terms describe movements in the exchange rate. The vocabulary depends on whether the rate is floating or fixed.
| Direction of change | Floating system | Fixed system |
|---|---|---|
| Currency value falls | Depreciation | Devaluation |
| Currency value rises | Appreciation | Revaluation |
Depreciation and appreciation happen through market forces. Devaluation and revaluation are government decisions to change the pegged rate.
The four words describe the same direction of change, just under different exchange-rate regimes. The effects on exports, imports and inflation are the same; only the cause is different.