This set mixes the five skills from international trade and exchange rates: converting currency, naming appreciation and depreciation, tracing effects on traders, explaining a tariff and reading a trade account. Questions run from easier to harder. Try each on paper first, then open the answer.
All economies and currencies are fictional. Record each error in the mistake log and retest queue so you can retest weak points later. Unless stated, use 1 dora = 5 kesa.
Easier questions
1. Convert 64 dora into kesa.
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Dora to kesa, so multiply: 64 × 5 = 320 kesa.
2. A Kesland shopper pays 2,000 kesa for goods from Doravia. What is the price in dora?
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Kesa to dora, so divide: 2,000 ÷ 5 = 400 dora.
3. The rate changes from 1 dora = 5 kesa to 1 dora = 4.5 kesa. Has the dora appreciated or depreciated?
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One dora now buys 4.5 kesa instead of 5. It buys fewer, so the dora has depreciated. The kesa has appreciated.
4. Doravian goods trade: goods exports 740 million dora, goods imports 810 million dora. Find the balance of trade in goods.
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740 − 810 = −70 million dora, a deficit.
Medium questions
5. The rate rises from 1 dora = 5 kesa to 1 dora = 6 kesa. Calculate the percentage change in the dora’s value in kesa and say whether it is appreciation or depreciation.
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Change = 6 − 5 = 1. Percentage = 1 ÷ 5 × 100 = 20%. The dora buys more kesa, so this is appreciation.
6. A Kesland importer buys goods priced at 800 dora. Find the cost in kesa at 1 dora = 5 kesa and at 1 dora = 4 kesa. State the change.
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At 5: 800 × 5 = 4,000 kesa. At 4: 800 × 4 = 3,200 kesa. The cost falls by 800 kesa, so the importer benefits from the dora’s depreciation.
7. A Doravian exporter sells toys at a fixed price of 450 kesa each. How many dora does the exporter receive per toy at 1 dora = 5 kesa, and at 1 dora = 6 kesa? What does this show?
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At 5: 450 ÷ 5 = 90 dora. At 6: 450 ÷ 6 = 75 dora. The exporter receives 15 dora less per toy when the dora appreciates, because the same kesa price converts into fewer dora.
8. Doravia’s services exports are 150 million dora and services imports are 95 million. Using the goods balance from question 4, find the balance of trade in goods and services together.
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Services balance = 150 − 95 = +55. Goods balance = −70. Total = −70 + 55 = −15 million dora. Check: total exports 740 + 150 = 890, total imports 810 + 95 = 905, difference −15.
Harder questions
9. In Kesland’s market for bicycles, Qd = 160 − 2P and Qs = 2P − 60 (thousands), and the world price is 40. A tariff of 15 is introduced. Find the new price, domestic supply, quantity demanded, imports and tariff revenue. What do you notice?
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P = 55. Qd = 160 − 110 = 50. Qs = 110 − 60 = 50. Imports = 50 − 50 = 0. Revenue = 15 × 0 = 0. At this price domestic firms supply the whole market, so the tariff blocks imports completely. Compared with free trade (price 40, demand 80, supply 20, imports 60), consumers pay more and buy 30 fewer.
10. A Kesland tourist spends 36 dora in Doravia. The rate is 1 dora = 4 kesa. How much is this in kesa, and how would the trade account classify it from Doravia’s side?
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36 × 4 = 144 kesa. A foreign visitor paying for goods and services in Doravia counts as a services export (for travel and accommodation) or a goods export (for goods bought), because money flows into Doravia.
11. Explain in a short paragraph why a depreciating currency can help exporters but hurt a firm that imports its materials.
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A depreciation makes the home currency buy less foreign currency. Exports then cost fewer units of foreign currency, which can raise sales abroad. But imported materials priced in foreign currency now cost more in home currency, so the firm’s costs rise. The net effect depends on how much the firm exports, how much it imports and how sensitive buyers are to price.
If you got these wrong
- Questions 1, 2, 6, 10 (wrong number): check the direction of conversion in calculating a currency conversion.
- Questions 3, 5 (wrong word or percentage): revisit appreciation and depreciation.
- Questions 6, 7, 11 (one-sided explanation): use the four links in tracing effects on an importer and exporter.
- Question 9 (tariff table): rebuild it step by step with explaining a trade barrier using a model.
- Questions 4, 8, 10 (balances and classification): see describing trade-account components.
The percentage-base explorer and ratios tool help with checks. If one error type keeps returning, our online one-to-one Economics tuition can target it with fresh questions.