Interest & Exchange Rates

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1. Which of the following affect the demand for the pound on the foreign exchange market?

  • ICI (a UK firm) buying raw materials from overseas
  • UK speculator buying shares on the New York Stock Exchange
  • Boeing (US aircraft manufacturer) buying engines from Rolls-Royce in the UK
  • UK tourists going on holiday
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2. Interest rates are most likely to be cut when the economy is:

  • Entering a recession
  • Enjoying a boom
  • Experiencing high inflation
  • Experiencing much lower employment

3. What is an exchange rate?

  • The price of buying foreign currency
  • The rate you pay back on a loan
  • A tax you pay when buying goods whilst abroad
  • A tax businesses pay to operate in another country

4. What is an interest rate?

  • The rate at which foreign goods are bought
  • A tariff on foreign imports
  • The percentage reward or payment over a period of time that is given to savers on savings or paid by borrowers on loans
  • A tax paid by consumers when buying foreign goods

5. What is meant by a fixed interest rate?

  • An interest rate which will not change at whatsoever over the life of a loan
  • An interest rate which can flucuate
  • A tax paid by tradesmen
  • Interest rates will only change if the prime minister says they must


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