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  • Exchange rates

Click to read the article below and then answer the questions:

Turks chase missing billions in foreign exchange reserves

  • Explain what is meant by foreign exchange reserves.

  • Using a diagram, analyse how foreign exchange reserves can be used to prop up a currency.

  • ‘Erdogan had effectively barred policymakers from raising rates to slow double-digit inflation, leaving them with few options to prevent the lira’s depreciation.’ Using a diagram, analyse how raising the interest rate could be used to prevent the lira’s depreciation.

  • ‘It still tumbled 37 per cent against the dollar in the 18-month period until November 2020.’ Use demand and supply analysis to explain how the lira could have depreciated despite significant intervention in the foreign exchange market.

Gavin Clarke, Emmanuel College

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