Business Studies Multiple Choice Question – 19 April 2022

In March 2022, the pound sterling (£) depreciated against the euro (€) and the US dollar ($).

The most likely impact of this depreciation on UK businesses would be?

Select ONE answer:

1. export prices will increase
2. export orders will increase
3. import orders will increase
4. import prices will decrease

Show the workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Business Studies KS4 & KS5 classes

The answer is 2

1. Not correct – export prices will now be cheaper for foreign buyers
2. Correct –Depreciation of a currency is a decrease in the value of a country’s currency relative to one or more foreign currencies. The pound has depreciated meaning that European and American buyers need to exchange less of their own currency to buy the same number of pounds. This means that UK exports are now cheaper in Europe and America so the demand for exports increases.
3. Not correct – imports will now be more expensive to the UK businesses and therefore orders will decrease.
4. Not correct – import prices will increase as more pounds have to be exchanged for the same amount of euros and dollars.

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