CAIE A-Level Economics 11.2.4 Exchange Rate System Changes

Practise distinguishing depreciation, appreciation, devaluation and revaluation and tracing how reserves, rates or currency trades move fixed, floating and managed exchange rates.

Exam points

match depreciation and appreciation to floating rates and devaluation and revaluation to fixed rates
explain how reserve sales, interest-rate cuts or selling domestic currency can lower a managed rate
evaluate fixed versus floating rates through stability, reserves, adjustment and policy freedom

[Maximum number: 1]

An increase or decrease in exchange rates can take place in both a floating and a fixed exchange rate system but different terminology is used for each system.

What is the correct terminology?

floating rate

decreases

fixed rate

increases

depreciation

appreciation

depreciation

revaluation

devaluation

appreciation

devaluation

revaluation

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11.2.4—Exchange rate system changes question 1