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 foreign exchange rate is the value of one currency stated in units of another. It tells you how many units of one currency you get for one unit of another.
A few examples of typical quotations:
The exchange rate matters because it determines:
Currencies are bought and sold on the foreign exchange (FX) market, where one currency is exchanged for another.
Defining an exchange rate or the foreign exchange market
What comes up: a 2-mark "Define" question asking what an exchange rate is, or what the foreign exchange market is.
Write (two marks): (1) An exchange rate is the price of one currency expressed in terms of another currency. (2) It tells you how many units of a second currency you receive in exchange for one unit of the first. For the foreign exchange market: (1) a market where different countries' currencies are bought and sold; (2) where one currency is exchanged for another.
Watch out: a single-sentence answer that names only one of the two mark points (for example "how much a currency is worth" without specifying "in terms of another currency") typically earns only 1 mark.