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A-Level Economics · Currency depreciation diagram question

Which point on the exchange-rate axis is the DEPRECIATED pound?

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The diagram

The answer

Point B. S₂ crosses D at F; read across to the axis — the pound falls from e₁ to e₂. More pounds traded, each one worth less. Find the new crossing first: S₂ meets D at point F. Then read ACROSS to the exchange-rate axis — point B, e₂. Depreciation means the pound buys fewer dollars, so B must sit BELOW A.

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This is one of 5 questions on the currency depreciation diagram — every corner lettered, every wrong answer diagnosed.

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