Page 41 - UKCAT 2017

rates uctuate, my UK pounds may buy fewer euros (pound devalues), so a holiday in Portugal becomes more expensive or,
if my pounds buy more euros (pound revalues), much cheaper. Problems arise for the eurozone (as for an individual country)
if demand and supply for the euro fail to balance – excess demand causes exchange rate rises, excess supply means the exchange rate falls.
VR3-1 If the pound devalues against another currency, exports from the UK to that country will cost
less in the country buying them in currency terms.
A. True
B. False
VR3-2 A person using the euro in France or Germany will be unaffected
VR3-4 If I convert £50 into the equivalent number of US dollars, I will be
C. Can’t Tell
A. True
B. False
C. Can’t Tell
by changes in exchange rates between the euro and the UK £, even if they purchase goods imported from the UK.
VR3-6 When a saver makes a deposit in a bank, this technically means the money is being lent by the bank. A. True
VR3-7 If by importing £100 million-worth of raw materials, a country is
A. True
B. False
C. Can’t Tell
then able to export an extra £200 million-worth of exports to other countries, the overall supply of its currency will rise.
VR3-3 If the interest rate on a savings account in Australia gives a rate of return three times higher than the best rate in the UK, a saver would always get at least twice as good a return after tax and currency uctuations have been taken into account.
A. True
B. False
C. Can’t Tell
A. True
B. False
C. Can’t Tell
able to buy the same basket of groceries in the USA as I originally purchased in the UK.
A. True
B. False
C. Can’t Tell
VR3-5 A country which imports many raw materials including oil and
chemicals from overseas so it can manufacture products is in danger of adversely affecting its exchange rate as a result.
B. False
C. Can’t Tell
UKCAT Of cial Guide 2017 41
PRACTICE QUESTIONS