WASSCE Economics · Paper 1 style

Exchange rate

One sample question with the full working. 1 more in the app, with instant feedback and repair sessions for the traps below.

Devaluation of a country's currency means

Araising its value against other currencies
Bofficially lowering its value against other currencies
Cprinting new notes
Da fall in the general price level

Show the answer and working

Answer: B

Devaluation = lower official exchange value.

Trap A Reverses the direction of the effect: Trace the chain step by step (e.g. buying securities → banks gain cash → money supply rises) and check the sign at every link.

Trap C Confuses monetary and fiscal policy tools: Monetary (central bank): interest/policy rate, open market operations, reserve requirements. Fiscal (government): taxation and public spending, budget deficit/surplus.

Trap D Inflation misconceptions: Demand-pull: too much money chasing few goods. Cost-push: rising costs. Debtors and holders of real assets gain; creditors and fixed-income earners lose.

Traps in Exchange rate

Reverses the direction of the effect
Trace the chain step by step (e.g. buying securities → banks gain cash → money supply rises) and check the sign at every link.
Confuses monetary and fiscal policy tools
Monetary (central bank): interest/policy rate, open market operations, reserve requirements. Fiscal (government): taxation and public spending, budget deficit/surplus.
Inflation misconceptions
Demand-pull: too much money chasing few goods. Cost-push: rising costs. Debtors and holders of real assets gain; creditors and fixed-income earners lose.

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