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Cambridge IGCSE Economics practice

Paper 2 structured question: Foreign exchange rates

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Foreign exchange rates

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Paper 2Structured Questions1 marks

Understanding exchange rate systems is vital for international trade.

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Exchange Rate Systems

There are two primary types of exchange rate systems: floating and fixed. A floating exchange rate is determined by market forces, while a fixed exchange rate is set by the government.

  1. a

    State the two types of exchange rate systems.

    Aim for approximately 1 distinct marking point.

    [1]

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Paper 2 structured question: Foreign exchange rates

Paper 2Structured Questions3 marks

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Effects of Exchange Rates

Exchange rates can significantly affect a country's exports and imports. A strong currency makes imports cheaper and exports more expensive, while a weak currency has the opposite effect.

  1. a

    Explain how a strong currency affects a country's exports and imports.

    Aim for approximately 3 distinct marking points.

    [3]