Day: August 9, 2017

Business Studies Multiple Choice Question – 9 August 2017

A small UK baker buys flour from a French supplier. The flour costs 50 Euros per sack. The exchange rate is currently £1= 2.5 Euros. It then changes to £1 = 2 Euros.

Which of the following is MOST LIKELY results of this change in the exchange rate for the baker?

Select ONE answer:

  1. The cost of buying the goods from the French supplier will fall
  2. The cost of buying the goods from the French supplier will rise
  3. The price of the flour increases in France
  4. The business will gain more Euros for the same amount of pounds
  5. There is no change to the price in Europe

In April 2016, £1 could be exchanged for $1.60 when travelling to America. In August 2016, this was down to $1.30. This is sad for tourists, but great for exporters like Rolls-Royce Aerospace, JCB, Bentley Motors – why?
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This is multiple choice question is suitable for Business Studies KS4 classes.

The answer is 2 – The cost of buying flour at €50 per sack at an exchange rate of 2.5 is £20. The cost of buying flour at €50 per sack at an exchange rate of 2 is £25, a cost increase to the UK baker of £5.

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