Tag: Edexcel

A small UK retailer sells china plates in the UK. Its main competitors are foreign firms. The value of the pound increases compared to the US$.

Which of the following would be the MOST LIKELY results of this change in the £/US$ exchange rate for the UK retailer?

Select ONE answer:

1. The retailer’s UK sales will increase as the UK retailer’s products will seem cheaper
2. His competitors plates will seem more expensive
3. The businesses products will seem more expensive in comparison to the foreign imports
4. The businesses sales will fall
5. The business will be more competitive

A strong £ means lots of $ to the £. This means that £1 buys more foreign currency, e.g. £1 today buys $2 compared to £1 a month ago when it bought $1.50. Goods imported into the UK will be cheaper for consumers. An iPad might cost £300 instead of the price a month ago of £400. For businesses exporting to the US, a strong £ means their products will appear more expensive to US consumers, e.g. a Dyson vacuum goes up to $500 compared to $400 the month before. If a strong £ continues, exporters cannot sell products abroad and businesses in the UK cannot compete with cheap imports. What might be the financial impact for these businesses if this continues?
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This is multiple choice question is suitable for Business Studies KS4 classes.

The answer is 3 – The cost of selling china plates at $50 per plate in the UK at an exchange rate of $2 to £1 is £25 for a foreign firm. The cost of selling china plates at $50 per plate in the UK at an exchange rate of $4 to £1 is £12.55 for a foreign firm, a price improvement of £12.5 for a foreign firm selling into the UK.

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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.

This work is licensed under a Creative Commons Attribution 4.0 International License.

A UK business sells shoes in Europe. Each pair is sold for £40. The exchange rate between the pound and Euro decreases from £1 = 2 Euros to £1 = 1 Euro.

Which of the following is MOST LIKELY to best describe the change in price of the shoes?

Select ONE answer:

1. The shoes are now cheaper in Europe
2. The price of the shoes decreases by half the original amount
3. The shoes become more expensive
4. The shoes still sell for £40 in the UK
5. There is no change to the price in Europe

When exchanging from a foreign currency to pounds the rule is……?
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This is multiple choice question is suitable for Business Studies KS4 classes.

The answer is 1 – The cost of selling a show worth £40 from the UK to Europe at an exchange rate of €2 will be €80. The cost of selling a show worth £40 from the UK to Europe now at an exchange rate of €1 will be €40, a cost decrease of €40.

This work is licensed under a Creative Commons Attribution 4.0 International License.