Business Studies Multiple Choice Question – 6 August 2017

A small UK high street retailer obtains materials from a foreign supplier in the EU. The cost of buying each product is 30 Euros. The retailer sells the goods in the UK for £35 each. The exchange rate is currently £1= 1.5 Euros. It then changes to £1 = 2 Euros.

Which TWO of the following would be the MOST LIKELY results of this change in the exchange rate for the UK retailer?

Select TWO answers:

  1. There will be no change because the price in the UK will stay the same
  2. The cost of buying the goods from the EU will rise
  3. The cost of buying the goods from the EU will fall
  4. The business will have to exchange more pounds to get the same amount of Euros
  5. The business will have to exchange less pounds for the same amount of Euros

What is an exchange rate?
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This is multiple choice question is suitable for Business Studies KS4 classes.

The answer is 3 & 5 – The cost of buying €30 at an exchange rate of 1.5 is £20. The cost of buying €30 at an exchange rate of 2 is £15, a cost saving of £5.

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