A-LevelEconomicsInternational economic issues9708/12 · May/June 2019 · Q271 Mark

Under a system of floating exchange rates, what determines the foreign exchange value of a currency?

Athe overall supply of and demand for a currency on currency markets

Bthe purchasing power of the currency relative to the purchasing power of foreign currencies

Cthe surplus or deficit on the balance of payments on current account

Dthe differential between domestic and foreign interest rates

✓ Correct answer

A: the overall supply of and demand for a currency on currency markets

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Topic: International economic issues, A-Level Economics (syllabus 9708). Multiple choice, 1 mark.
Source: A-Level Economics, May/June 2019 Paper 1 Variant 2, question 27.

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