Photo AI
British pound to US dollar exchange rate (value of one pound in dollars), June 2017 to June 2019 - Edexcel - A-Level Economics A - Question 3 - 2021 - Paper 2
Question 3
British pound to US dollar exchange rate (value of one pound in dollars), June 2017 to June 2019. Which one of the following has been the overall change in the Brit... show full transcript
Worked Solution & Example Answer:British pound to US dollar exchange rate (value of one pound in dollars), June 2017 to June 2019 - Edexcel - A-Level Economics A - Question 3 - 2021 - Paper 2
Step 1
Which one of the following has been the overall change in the British pound to US dollar exchange rate from 1st January 2018 to 1st January 2019?
Answer
The correct answer is B) Depreciation. The value of the British pound compared to the US dollar has fallen during the specified time frame, indicating a depreciation of the pound.
Step 2
Explain the impacts of the depreciation on the UK economy.
Answer
-
The UK current account would likely improve due to the depreciation. A weaker pound makes UK exports cheaper for foreign consumers, potentially leading to an increase in exports.
-
At the same time, the cost of imports would rise as foreign goods become more expensive due to the weaker currency, which could lead to a decrease in imports.
-
Accurate reference to the exchange rate data from 1st January 2018 to 1st January 2019 supports this analysis.