Analyse the advantages and disadvantages to PAC of country X's exchange rate appreciating against other currencies (lines 12 to 17).

Mark scheme

Marking points from the official mark scheme (May/June 2020). The mark or mark type is shown in brackets.

1. [1] Knowledge: Appreciating exchange rate – a country’s currency value increasing in terms of other currencies
2. [1] Knowledge: Explanation of terms, for example appreciation and references to external value/trade
3. [1] Knowledge: Stronger currency means imports are cheaper and exports more expensive, including ‘invisible’ exports such as tourism
4. [1] Knowledge: Credit understanding that government may try to use policies that have an impact on exchange rates
5. [1] Application: Advantages - imports cheaper (pizza vans)
6. [1] Application: Disadvantages – PAC cannot benefit from country X being seen as a ‘low cost’ country as more expensive for tourists now, impact on sales
7. [1] Analysis: Reasoned chain of argument, e.g. If country X is not seen as a ‘low cost’ country then may lead to fewer tourists, less potential revenue and profit
8. [1] Analysis: Impact of decrease in import prices, e.g. imported equipment (pizza vans?) ability to plan and not under-estimate costs / finance needed
9. [1] Analysis: If country X is comparatively more expensive for tourists than other countries in the same region, even more likely to lose tourism business