Exchange rates
AQA GCSE Business Studies revision on Exchange rates. Aligned to the AQA GCSE Business 8132 specification. This bank has 10 practice questions on this topic.
Sample questions (3 of 10)
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Question 1
What does the term SPICED stand for in the context of exchange rates?
- A) Strong Pound Imports Cheaper Exports Dearer
- B) Strong Pound Increases Costs Every Day
- C) Small Pound Increases Cheap Exports Daily
- D) Strong Pound Imports Cost Expensive Exports Dear
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Answer: Strong Pound Imports Cheaper Exports Dearer
The acronym highlights that when a currency strengthens, imports become cheaper for domestic consumers, while exports become more expensive for foreign buyers. This is a vital concept for businesses to understand when assessing international competitiveness.
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Question 2
If the exchange rate for the British Pound (GBP) against the US Dollar (USD) moves from 1.30 to 1.50, what has happened to the Pound?
- A) It has depreciated
- B) It has appreciated
- C) It has devalued
- D) It has deflated
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Answer: It has appreciated
When the exchange rate increases, the Pound becomes stronger, meaning it can purchase a larger amount of foreign currency. This represents an appreciation in the value of the Pound relative to the Dollar.
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Question 3
A UK business imports raw materials from Germany. If the Pound weakens against the Euro, what will happen to the cost of these materials?
- A) The cost will stay the same
- B) The cost will decrease
- C) The cost will increase
- D) The cost will become irrelevant
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Answer: The cost will increase
When the Pound weakens, the business needs more Pounds to buy the same amount of Euros. Consequently, the price of imported raw materials rises, which may lead to reduced profit margins unless the business increases its prices.
Want to test yourself on the remaining cards for this topic?
7 more questions on Exchange rates — plus mistakes tracking and spaced repetition across the whole Business Studies spec.