Question 22N.1.SL.TZ0.3a
| Date | November 2022 | Marks available | [Maximum mark: 10] | Reference code | 22N.1.SL.TZ0.3a |
| Level | SL | Paper | 1 | Time zone | TZ0 |
| Command term | Explain | Question number | a | Adapted from | N/A |
Explain two factors that might cause an appreciation of a currency.
[10]
Marks should be allocated according to the paper 1 markbands for May 2022 forward, part A.
Answers may include:
- Terminology: appreciation.
- Theory: explanation of any two of the following factors: foreign demand for exports, domestic demand for imports, inward foreign direct investment, inward portfolio investment, remittances, speculation, relative inflation rates, relative interest rates, relative growth rates and central bank intervention.
- Diagram: exchange rate diagram showing appreciation of a currency.
A maximum of [6] should be awarded if only one cause of an appreciation is explained.
Where students just answer with an increase in demand or a decrease in supply without explaining the underlying causes of these changes then a maximum of [6] is rewarded.
This was the least popular question on the paper, but it did produce some good responses from the candidates that chose it. The strongest answers clearly explained the reasons why a country's currency might appreciate by covering causes such as rising demand for a country's exports, greater investment inflows into a country because of its increasing interest rates and a rise in speculative demand for a country's currency. It was good to see students supporting their two factors by accurately using diagrams and terminology.
