Topic Questions (EASY): Exchange Rate

The exchange rate for the UK£ in terms of the US$ is shown in the diagram below, with the original equilibrium exchange rate at X. If UK interest rates increase, what would be the new equilibrium exchange rate of the UK£?

A

B

C

D

According to the given exchange rates, what is the likely range of values for £1 in terms of $?

£1 = €1.208;
$1 = €0.727;
€1 = $1.375

£1=less than $0.50

£1=between $0.50 and $1

£1=between $1 and $1.50

£1=more than $1.50

If the value of the US dollar increases against the Australian dollar, what is a likely outcome?

A rise in the volume of exports from the US to Australia

An increase in the volume of imports to the US from Australia

Fewer people from the US take holidays in Australia

More people from Australia take holidays in the US