SQA National 5 Economics Practice Exam

A strong currency means that it has a high value compared to other currencies. When a country's currency appreciates, its goods and services become more expensive for foreign buyers who have to convert their own weaker currencies into the stronger one to make purchases. As a result, exports from that country can become less competitive in the international market, as higher prices may lead to a decrease in demand from foreign consumers. This understanding is crucial for grasping how currency strength impacts trade dynamics, particularly in how it alters pricing for international buyers.

The other choices do not accurately represent the relationship between currency strength and export prices. A strong currency does not make exports cheaper or guarantee an increase in export volumes. There is also an inherent effect on prices rather than a neutral impact. Therefore, the conclusion is that a strong currency leads to an increase in export prices, making them more expensive for foreign buyers.