What this practice covers
These questions are drawn from past IB Economics papers and filtered to exchange rates. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
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What examiners see students get wrong here
These are the errors that cost marks on exchange rates, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Using "devaluation" for a market-driven fall; that is a depreciation.
- Assuming a depreciation always improves the current account. It depends on elasticities (Marshall–Lerner) and on the time frame (J-curve).
- Forgetting that a depreciation raises imported input costs for domestic firms, so exporters are not simply winners.
- Mislabelling the axes, or not stating which currency the market is for.
- Ignoring supply-side capacity: cheaper exports achieve nothing if firms cannot produce more.
- Treating exchange-rate changes as affecting only trade, and forgetting foreign-currency debt.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Exchange Rates revision notes.