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Question 23M.2.SL.TZ0.2d

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Date May 2023 Marks available [Maximum mark: 4] Reference code 23M.2.SL.TZ0.2d
Level SL Paper 2 Time zone TZ0
Command term Explain Question number d Adapted from N/A
d.
[Maximum mark: 4]
23M.2.SL.TZ0.2d
(d)

Using an exchange rate diagram, explain how capital flight may increase the overvaluation of the franc (Text D, paragraph 6).

[4]

Markscheme

Candidates who label diagrams incorrectly can be awarded a maximum of [3].

For an exchange rate diagram, the vertical axis may be exchange rate, price/value of the (CFA) franc in euros, euros/(CFA) franc or euros per (CFA) franc. The horizontal axis should be quantity, or quantity of (CFA) francs. A title is not necessary.

Examiners report

This question highlighted a lack of understanding among most candidates regarding the concept of capital flight, which results in an increased supply of domestic currency (francs in this case). Several candidates mistakenly equated "overvaluation" with "revaluation" or "appreciation," leading them to draw diagrams showing the exchange rate rising. It was not uncommon to see diagrams depicting an increase in the demand for francs and a subsequent rise in the exchange rate. It is evident that candidates struggled trying to illustrate a fixed exchange rate system.

Syllabus sections