The exchange rate between the pound sterling and the US dollar is initially £1 = $1.5.
A UK firm sells a product in the USA for $300.
The exchange rate changes to £1 = $1.2 and the firm keeps the dollar price unchanged.
What will be the price of the product in pounds?
Select ONE answer:
- £200
- £250
- £300
- £360
Show your workings to arrive at your answer, and explain and justify your reasons:……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple choice question is suitable for Economics KS5 classes.
The answer is 2
- This is the initial price i.e. $300/1.5.
- Correct: $300/1.2.
- This would be the case if the exchange rate changed to £1 = $1.
- This is $300 x 1.2.
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