Exchange Rates (DP IB Economics: HL): Exam Questions

Extract C, Paragraph 3

The Euro has seen significant movement against the dollar as European tourism to the United States reaches record levels this summer. Currency traders note increasing currency exchanges as travellers prepare for their trips, while market analysts observe shifting patterns in both currencies' relative values.

Extract A, Paragraph 3

Hong Kong's monetary authority has intervened in currency markets following a surge in technology imports from the United States. Analysts note the authority's use of foreign reserves to maintain its fixed exchange rate policy despite strong market pressures from increased trade activity.

Extract B, Paragraph 1

China's managed exchange rate system has faced pressure as international trade patterns shift. The People's Bank of China has responded to recent market movements through currency market operations, working to maintain stability within its predetermined trading band.

Extract C, Paragraph 2

A British currency trader speculates on sterling-euro movements amid changing market conditions. After converting a substantial sum from euros to pounds based on expected appreciation, unexpected political developments cause sterling to depreciate significantly against the euro.

Extract D, Paragraph 3

Nigeria's currency has depreciated significantly following a decline in oil prices. Local manufacturers report increased competitiveness in export markets, while tourism operators note rising international visitor numbers. However, domestic firms face higher costs for imported raw materials, and policymakers express concern about inflationary pressures.

Extract B. Paragraph 1

Switzerland's strong currency has created challenges for its export-orientated economy. Luxury watch manufacturers report declining international sales, while the tourism sector faces reduced visitor numbers. However, Swiss consumers benefit from cheaper imported goods, and some industries report lower production costs.

Extract C, Paragraph 3

Indonesia's weakening currency has created mixed effects across its economy. Manufacturing exporters report improved international sales, though domestic macroeconomic performance has fallen due to rising costs. The tourism sector benefits from increased international visitors, while local businesses face challenging costs for equipment and materials.

Extract B, Paragraph 2

Denmark maintains a fixed exchange rate against the euro, while neighbouring Norway allows its currency to float freely. Denmark maintains currency stability, while Norway allows its currency value to adjust automatically to oil price fluctuations and changing market conditions.

Extract C, Paragraph 2

Argentina's central bank announces plans to remove its fixed exchange rate against the US dollar. The policy change comes after two decades of maintaining a set rate through market interventions. Manufacturing and agricultural sectors are preparing for the transition, while financial markets await implementation details.