Edexcel IGCSE Economics 2.2.3.d depreciation
Practise depreciation questions by predicting export and import changes, then evaluating effects using product and exchange-rate data.
- Syllabus
- First assessment 2019
- Course
- Economics 4EC1
Exam points
- Predict that depreciation makes exports cheaper and imports dearer for trading partners.
- Explain a contextual advantage of depreciation for exporters or the current account.
- Assess export demand effects using data, product examples and limits to responsiveness.
2.2.3.d Depreciation question 1
[Maximum number: 9]
In 2020, 2\% of US exports went to Australia. The main categories of goods exported included machinery, vehicles, medical instruments and aircraft. The US dollar ($) depreciated against the Australian dollar (AUD) in 2020.
With reference to the data above and your knowledge of economics, assess the likely impact on the demand for US exports to Australia after the depreciation of the US dollar.
AO2 (3 marks)/AO3 (3 marks)/AO4 (3 marks)
AO2 and AO3
- A depreciation is where the value of currency falls relative to another currency
- A depreciation of the US dollar against the Australian dollar may result in an increase in the amount of exports of goods between the US and Australia
- This is because US exports are now cheaper to purchase as fewer Australian dollars are required to be exchanged for US dollars
- This could result in more exports of machinery, vehicles, medical instruments and aircraft between the two countries
- This could further improve the trade balance between the US and Australia if more exports are traded compared to imports
A04
- However, a depreciation of the US dollar may not result in an overall increase in exports of goods between the US and Australia
- The impact will depend on the size and duration of the depreciation
- The impact will also depend on PED for US exports
- The amount of goods traded between the two countries will not just depend on the exchange rate between the US and Australia
- The quality of US exports is a factor in whether Australia will purchase more US made goods, not just the exchange rate
(9)
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-3
- Demonstrates basic knowledge and understanding by developing relevant points. Limited application of economic terms, concepts, theories and calculations (AO2).
- Information presented will lack selectivity and organisation. Interpretation of economic information will be limited, with a lack of analysis of issues (AO3).
- Only offers one viewpoint, meaning there is an unbalanced and incomplete evaluation, showing limited understanding and awareness (AO4).
Level 2
4-6
- Demonstrates partial knowledge and understanding by developing relevant points. Partial application of economic terms, concepts, theories and calculations (AO2).
- Information presented will demonstrate some selectivity and organisation. Interpretation of economic information will be good, with some analysis of issues (AO3).
- Offers more than one viewpoint but the argument may lack balance, leading to an evaluation that may not demonstrate full understanding and awareness (AO4).
Level 3
7-9
- Demonstrates clear knowledge and understanding by developing relevant points. Appropriate application of economic terms, concepts, theories and calculations (AO2).
- Information presented will demonstrate excellent selectivity and organisation. Interpretation of economic information will be excellent, with a thorough analysis of issues (AO3).
- Offers more than one viewpoint. The argument is well balanced and coherent, leading to an evaluation that demonstrates full understanding and awareness (AO4).
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