CAIE A-Level Economics 6.4.1 Exchange Rate

CAIE A-Level Economics 6.4.1 Exchange Rate
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise defining nominal exchange rates as currency prices, converting cross-rates and distinguishing them from real exchange rates adjusted for relative price levels.

How this is tested

  • read a nominal exchange rate as the amount of one currency exchanged for a unit of another
  • combine two quoted rates consistently to calculate an implied cross-currency value
  • distinguish the money quotation from a real exchange rate adjusted for relative inflation

Question 1(a)(ii)

[Maximum number: 2]

Russia's economic problems are getting worse

Russia's currency, the rouble (RUB), has been falling rapidly in value.

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An index of the real exchange rate fell from a value of 100 in 2010 to 75.8 in 2015 and this should have the effect of eventually helping to encourage exports.

Table 1.1: Selected economic indicators for Russia 2013-2015

Table 1.1: Selected economic indicators for Russia 2013-2015

Explain the difference between a nominal exchange rate and a real exchange rate.