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Question 22N.1.SL.TZ0.a

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Date November 2022 Marks available [Maximum mark: 10] Reference code 22N.1.SL.TZ0.a
Level SL Paper 1 Time zone TZ0
Command term Explain Question number a Adapted from N/A
a.
[Maximum mark: 10]
22N.1.SL.TZ0.a

Explain two factors that might cause an appreciation of a currency.

[10]

Markscheme

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.

Examiners report

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.

Syllabus sections