Question 1 Report
The diagram shows the exchange rate for the Brazilian real measured in US dollars. The rate falls from R1 to R2 after investors sell reais.
(a) State whether the real has appreciated or depreciated. [1]
(b) Explain one effect of this change on the price of Brazilian exports in the US market. [2]
(c) Calculate the percentage fall in the exchange rate if R1 was $0.25 and R2 was $0.20. [3]
(a) The Brazilian real has depreciated. Its exchange rate has fallen from \(R1\) to \(R2\), so each real is worth fewer US dollars. [1]
(b) Each real now buys fewer US dollars. [1] Prices set in reais convert into lower dollar prices, so Brazilian exports become cheaper for US consumers. [1]
(c) First calculate the fall:
\[\$0.25-\$0.20=\$0.05\]
Then divide by the original exchange rate:
\[\frac{\$0.05}{\$0.25}=0.20\]
\[0.20\times100=20\%\]
The exchange rate fell by 20%. [3]
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