Lucy imports high quality pasta from Southern Italy for sale at his delicatessen in Stafford.
The exchange rate between the pound (£) and the euro (€) is important for Lucy.
She buys 100 kg of pasta every month. The price of pasta is €5 per kg.
In June the exchange rate changed to £1.00 = €1.20 from €1.25. What effect would this have on Lucy’s business?
Select ONE answer:
- The cost of importing pasta from Italy stays the same.
- Her net cash flow will improve.
- The euro price of pasta will rise.
- Her import costs will rise.
Show the workings to arrive at your answer, and explain and justify your reasons:
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This multiple-choice question is suitable for Business Studies KS4 & KS3 classes
The answer is 4
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