ACCA Applied Knowledge · Business and Technology · Macroeconomic factors
A UK company imports components priced in US dollars. Which movement in the exchange rate would make these imports cheaper in pounds sterling?
Imports priced in dollars become cheaper in sterling when sterling appreciates against the dollar, because each pound then buys more dollars. A weaker pound means more pounds are needed to pay the same dollar price, so imports would become more expensive.
- ASterling appreciates against the US dollarCorrect
- BSterling depreciates against the US dollar
- CThe US dollar appreciates against sterling
- DThe US government imposes a tariff on exports
Explanation
When sterling appreciates, each pound buys more dollars, so a dollar-priced component costs fewer pounds. Depreciation of sterling (or appreciation of the dollar) has the opposite effect and makes imports dearer.
Did you get it right without looking?
One question tells you little. A timed set on Macroeconomic factors shows your real accuracy, how long you take and where you lose marks.
More Macroeconomic factors questions
- Which of the following is a typical macroeconomic objective of a government?
- A central bank raises its base interest rate to reduce inflationary pressure. What is the most likely immediate effect on businesses?
- A country operates a floating exchange rate system. Its central bank is concerned that rising demand for its currency from foreign investors…
- A country runs a large and persistent deficit on the current account of its balance of payments. Which of the following is the most likely c…
- A country's currency depreciates significantly on the foreign exchange markets. Other things being equal, what is the most likely effect on …
- A government imposes a tax on imported steel to protect domestic steel producers. Which term describes this measure?