British pound to US dollar exchange rate (value of one pound in dollars), June 2017 to June 2019 - Edexcel - A-Level Economics A - Question 3 - 2021 - Paper 2
Question 3
British pound to US dollar exchange rate (value of one pound in dollars), June 2017 to June 2019.
Which one of the following has been the overall change in the Brit... show full transcript
Worked Solution & Example Answer:British pound to US dollar exchange rate (value of one pound in dollars), June 2017 to June 2019 - Edexcel - A-Level Economics A - Question 3 - 2021 - Paper 2
Step 1
Which one of the following has been the overall change in the British pound to US dollar exchange rate from 1st January 2018 to 1st January 2019?
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Answer
To determine the overall change in the British pound (GBP) to US dollar (USD) exchange rate between 1st January 2018 and 1st January 2019, we can analyze the provided exchange rate graph. From the graph, it is evident that the value of one pound in dollars fell from approximately 1.36 to about 1.27 over the specified period.
Given that the value of the pound decreased, the correct answer to this question is option B: Depreciation. This choice reflects the decrease in the exchange value, confirming that the pound has depreciated against the dollar.
Step 2
Knowledge
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Answer
The UK current account is likely to improve, leading to a reduction in the deficit. This can occur due to factors such as an increase in exports and a decrease in imports over the period observed.
Step 3
Application
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Answer
The exchange rate data from 1st January 2018 to 1st January 2019 shows that the pound depreciated, impacting trade balances.
Step 4
Analysis
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Answer
As the pound becomes weaker, UK exports tend to become more competitive in foreign markets, making them more appealing to US consumers. Consequently, this increase in export competitiveness should contribute positively to reducing the UK’s current account deficit.
