Edexcel IGCSE Economics 2.2.3.b currency supply and demand factors

Practise currency-diagram questions by shifting supply or demand for pounds and labelling new exchange rates and quantities.

Exam points

Shift demand for pounds after higher exports, interest rates or expected currency gains.
Shift supply of pounds after import changes and label the new rate and quantity.
Distinguish currency speculators from other financial actors in MCQ items.

[Maximum number: 3]

Figure 3 shows the supply of and demand for UK pounds ( £ ) and the equilibrium exchange rate against the US dollar ($).

Using the diagram below, draw the likely effect of a decrease in imports from the US on the equilibrium exchange rate of the UK pound ( £ ) against the US dollar ($). Label the new curve, the new equilibrium exchange rate and the new equilibrium quantity.

Figure 3

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2.2.3.b Factors affecting supply and demand of currencies question 1