A UK ceramics producer buys clay from Norway. Its Norwegian supplier keeps the price of the clay unchanged in Norwegian kroner. The pound depreciates against the Norwegian krone.
What happens to the amount the producer pays in pounds for the clay?
It decreases because each pound buys fewer Norwegian kroner.
It increases because each pound buys fewer Norwegian kroner.
It decreases because the pound is now worth less than before.
It stays unchanged because the price in Norwegian kroner stays unchanged.
118 exam-style questions on AQA GCSE Economics 2.4 International trade and the global economy, covering 2.4.1a The importance of trade, 2.4.1b Advantages of trade and interdependence, 2.4.1c UK exports and imports, 2.4.2a How exchange rates are determined, 2.4.2b Effects of exchange rate changes, 2.4.3a Free-trade and its arguments, 2.4.3b Free-trade agreements such as the EU, 2.4.4a Features and growth of globalisation, 2.4.4b Benefits and drawbacks of globalisation, and 2.4.4c Moral, ethical and sustainability considerations. Each one has a worked solution and a mark scheme showing where the marks go.