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Unit 4 Macro: Economic Benefits of EU Membership

Thursday, April 03, 2014

Membership of the European Union (EU) has had a big positive effect on average incomes in all but one of its member countries. That is the central finding of research by Nauro Campos, Fabrizio Coricelli and Luigi Moretti, to be presented at the Royal Economic Society’s 2014 annual conference. They also find that the more financially developed countries have grown significantly faster after joining the EU.

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German revival exposes deep fissure within Europe’s economies

Thursday, February 20, 2014

In the 1990s and early 2000s, Germany was seen by many as the new ‘Sick Man of Europe’. Between 1991 and 2005, GDP growth averaged only 1.2 per cent a year, compared to 3.3 per cent in the UK. Since then, the German economy has revived dramatically. The recovery in the German cluster of economies from the financial crisis has been as strong as in the United States, with the previous peak level of output being regained in 2011. Germany itself experienced virtually no increase in unemployment in 2008 and 2009, its exports are at record levels, and even the crisis in the Euro area has not prevented expansion in both output and employment.

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Eurozone problems - excellent video resource

Friday, February 14, 2014

Gains from international trade, the history of European economic integration, fiscal and monetary policy, the launch of the €uro and the 2008 financial crisis are all clearly animated and explained in this superb video. In just over 12 minutes it explains the problems of the €urozone and the threats and challenges it still faces. Definitely one to watch for the closing stages of an A2 macro course.

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Irish Bonds no longer ‘junk’. What does this mean?

Wednesday, February 05, 2014

Celebrations in Ireland as the credit ratings agencies no longer regard Irish government debt as ‘junk’, according to the BBC. What does this mean and why does it matter? Here are some bond market reminders and links, helping to explain how governments borrow, and at what cost.

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OCR F585 - Global Economy - Latvia’s Internal Devaluation

Wednesday, January 29, 2014

Much has been made of Latvia's internal devaluation, so much so that it has featured in OCR's Global Economy pre release. Most commentators have reacted negatively to the effect of Latvia's internal devaluation; here's why:

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Has austerity worked in Europe?

Friday, January 24, 2014

Inside Story from Al Jazeerah considers whether the worst is now over for some of the cluster of Euro Area countries who have received huge bail-outs  accompanied by fiscal austerity measures. The Spanish economy seems to be moving tentatively towards a stronger rebound despite persistently high mass unemployment.

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Unit 4 Macro: Latvia Joins the Euro

Monday, January 20, 2014

On the 1st January 2014, Latvia became the 18th country to enter the single currency Euro area, joining Estonia who adopted the Euro four years ago. How will it affect the economy? Are the forecast benefits greater than the costs and risks? Here are some resources on the issue:

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The recovery is well grounded – except in France

Thursday, January 09, 2014

The coming year looks like it will be a good one. At the start of each of the past five years, the economic scales have been tilted down, and the challenge has been to look for factors which might have tipped them back up. This year, the balance is reversed. The onus lies with the pessimists to prove their case. Not that there are any shortages on this score. For example, King Canute of Twickenham, aka Vince Cable, has solemnly commanded that house prices must stop rising, for fear of a new bubble.

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OCR F585:Lithuania targets Euro entry

Monday, December 30, 2013

The June 2014 F585 case study focuses in part on Latvia's decision to join the Euro - this happens on 1st January 2014. One of Latvia's Baltic State neighbours Lithuanian is also hoping to join the single currency bloc in January 2015. Lithuania's finance minister explains to Richard Milne the Financial Times Nordic and Baltic correspondent, why the Baltic country is aiming for the euro. 

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Unit 4 Macro: Tough Choices for a Troubled Euro

Thursday, December 12, 2013

The euro should either be dismantled in an orderly way or the leading members should do what is necessary to make it growth- and employment-friendly as fast as possible. That is the central message of Nobel laureate Professor Sir Christopher Pissarides, when he delivers his inaugural lecture as the first Regius Professor of Economics at the London School of Economics.

Professor Pissarides was once a passionate believer in the benefits of European monetary union. He now thinks that either the euro should be dismantled or the direction of economic policy dramatically reversed so as to promote growth and jobs and avoid creating a lost generation of educated young people.

‘We will get nowhere plodding along with the current line of ad hoc decision-making and inconsistent debt-relief policies’, he will say. ‘The policies pursued now to steady the euro are costing Europe jobs and they are creating a lost generation of educated young people. This is not what the founding fathers promised.’

The co-recipient of the 2010 Nobel Memorial Prize in Economic Sciences will outline what needs to be done to bring Europe back to life:

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Unit 4 Macro: CBI calls for Britain to stay inside the EU

Monday, November 04, 2013

The Confederation of British Industry has today launched a report called Our Global Future: The Business Vision for a Reformed EU - The report calls for further EU reform not least the completion of the single market in particular in services and the new internet economy. They argue for more free trade deals with other countries and regions.

The report produces estimates – based on past academic studies – that EU membership adds £62bn-£78bn a year to UK gross domestic product, equal to the combined economies of northeast England and Northern Ireland. That works out at £3,000 per household and £1,225 per individual. The fact sheets from the report can be found here

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Unit 4 Macro: Improving Competitiveness in Croatia

Tuesday, September 17, 2013

Economics student Anthony Beaumont writes on the policies that might sustain an improvement in the Croatian economy as it settles into being the 28th member nation of the EU single market

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Unit 2 Macro: Greek Unemployment Reaches 28%

Sunday, September 15, 2013

The rate of unemployment in Greece has reached a record of just under 28% of the labour force. To put this into context, in 2008 just before the Global Financial Crisis engulfed much of the EU economy in recession, Greek unemployment was 7.8% (equivalent to where the UK jobless rate is today). Youth unemployment is staggeringly high - the latest figures show that 58.8% of people under the age of 25 are out of work.

There are some tentative signs that the Greek economy may be at a turning point from the trough of a deep and persistent depression. After six years of full-blown recession some macro indicators suggest that confidence is seeping back for businesses and consumers and that the government debt crisis might ease a little. Tourism, which accounts for about a fifth of Greece's economic output and one in five jobs is having a strong year - tourism exports represent an injection in the Greek economy's circular flow of income and spending. Chinese tourists seem to be coming to Greece in much greater numbers!

But Greece has suffered gravely over the last few years - the level of real GDP is 25% lower than it was before the crisis and some economists have started to refer to Greece as a sub-merging economy whose trend growth rate is now negative.

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Unit 2 Macro: Portugal’s Brain Drain

Monday, September 09, 2013

With a deep recession and persistently high rates of unemployment among younger people. fears are growing about a brain drain in Portugal as highly qualified university graduates leave the country in search of a better life. Peter Wise, Financial Times Lisbon correspondent, reports on what the trend means for the troubled Portuguese economy. Losing "the best of a generation" poses important long-term threats to the competitiveness of the Portuguese economy. Some are moving to Angola and Brazil, the UK has also attracted skilled workers in health care, banking and IT.

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Unit 2 Macro: Lessons from the Whisky Industry in Exporting

Thursday, August 29, 2013

Britain's exports of whisky have been growing strongly in recent years helped by a lower pound and fast-rising demand from whisky drinkers in emerging markets. Whisky exports set to rise to £4.5bn by 2017 even though sales to traditionally strong markets in the European Union have stalled because of persistent recession in countries such as Spain, Portugal and Italy. This Channel 4 news report looks at the experiences of two whisky producers - one a small-scale manufacturer and the other the giant Diageo to consider prospects for UK exports as a way of strengthening the recovery,

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Introduction to Economics - Portugal’s Ghost Roads

Monday, August 26, 2013

Here is a superb five minute news video from the Financial Times that could serve as an excellent introduction to both micro and macroeconomics. Helped by EU structural funds, Portugal has invested huge sums in their motorway network; indeed Portugal has four times more motorway road space per head of population than the UK. However beset by persistent recession and the lagged effects of high fuel prices, many of these gleaming new roads are virtually empty - a waste a scarce economic resources. Road traffic has fallen more in Portugal than in any other European country in the past 15 months. Peter Wise, Lisbon Correspondent, reports on why empty roads provide a revealing insight into the depth of the country's recession.

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Paul Ormerod: No free lunch.  Defaults today mean less jam tomorrow

Thursday, July 25, 2013

Potential defaults in the Euro zone have been in the news again. In Portugal, the ruling coalition parties and the main opposition Socialists have been unable to agree on a European Union-led bailout plan after days of talks. Yields on the country’s 10 year bonds have approached 7 per cent, compared to the 1.5 per cent in Germany. There has been some improvement this week on the news that an early general election has been avoided, but yields still remain over 6 per cent.

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Unit 4 Macro: John Kay on Quantitative Easing

Monday, July 22, 2013

John Kay looks at the lack of evidence for the effect of quantitative easing as a driver for economic growth. He is excellent on some of paradoxes of the impact of QE on the macroeconomy of countries where it has been tried.

The main effect of QE according to Kay is to boost asset prices and the one certain consequence of this is that those who have assets - such as homeowners and stocks and shares - will benefit.

We strongly recommend that ambitious students take a look at some of the other articles written by John Kay - check out his web site by clicking this link

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Unit 4 Macro: Time Running Out for the Euro

Sunday, July 14, 2013

Cambridge economist Mike Kitson argues here that the Euro Zone will eventually collapse after a number of difficult years. As pressure again mounts in the Eurozone leading Cambridge economist Michael Kitson says the euro might 'stagger on' for a few more years but eventually it will disintegrate. Policy makers have been papering over the cracks in the Eurozone and causing major problems for many member countries which are trapped by tight fiscal rules

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European Union Economy Study Companion 2012

Thursday, June 06, 2013

An updated version of my EU economy study companion is being researched and written at the moment - but in case this might be useful as a revision resource, here is a stream version of the January 2012 document.

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Paul Ormerod: The Reinhardt and Rogoff miscalculation

Thursday, April 25, 2013

The distinguished American academic economists, Carmen Reinhardt and Ken Rogoff, have been very much in the news.  Their 2009 book, This Time is Different, was a comprehensive examination of financial crises over the past 800 years.  The work received many plaudits and awards.   They suggested that when the ratio of public debt to GDP in a country rose above the 90-100 per cent range, the chances of a financial crisis increased sharply.  And the consequence was that economic growth in the country would be adversely affected.

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Unit 4 Macro: Language Proficiency and Labour Mobility in Europe

Friday, April 12, 2013

Increasing foreign language proficiency could be a key policy tool for encouraging greater mobility of labour between countries of the European Union and reducing the huge differences in rates of youth unemployment. According to research by Professors Ainhoa Aparicio-Fenoll and Zoe
Kuehn, including foreign language studies in the compulsory school curriculum fosters migration across European countries.

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Paul Ormerod: Sovereign debt and Euro zone reality

Thursday, April 11, 2013

The recent debacle in Cyprus has essentially been shrugged off by the markets.  The European Central Bank vigorously asserts the crisis in the Euro zone is over.  So why is there continued unease about the financial viability of countries such as Spain and Portugal, a morass into which even the French are now being dragged?

Economic theory helps us understand a bit more about why this is the case.  One thing which the last few years in Europe have shown very starkly is the massive difference between debt which is denominated in nominal terms and that which is in real terms.  Nobel Laureate Chris Sims makes the point clearly in his recently published Presidential Address to the American Economic Association. 

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Unit 2 Macro: Labour Costs in the European Union

Wednesday, April 10, 2013

The European Union has just released some new figures on the spread of hourly labour costs among the member nations of the European Union. Labour costs are made up of wages & salaries and non-wage costs such as employers' social contributions e.g. national insurance payments in the UK. Students who have covered aggregate supply and demand theory might be able to consider why changes in labour costs can have an effect on key macroeconomic indicators such as inflation, demand, exports and growth.

Hourly labour costs are different from unit labour costs - the latter takes into account the productivity of people employed. For example, a 5% rise in hourly labour costs will leave unit labour costs unchanged if productivity rises by 5% over the same time period.

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Unit 4 Macro: Unemployment in Germany - The Hartz Reforms

Thursday, April 04, 2013

Germany’s low unemployment is in large part due to the ‘Hartz Reforms’, which started as early as 2003 and have reduced the long-run rate of unemployment by 1.1%. That is the central finding of research by Matthias Hertweck and Oliver Sigrist, to be presented at the Royal Economic Society’s 2013 annual conference.

Unemployment rates across much of Europe have surged to unprecedented levels in recent years, particularly among the southern countries. In contrast, German unemployment has continued to fall even during the Great Recession. The authors conclude:

‘Our results build a solid basis for the macroeconomic effectiveness of such labour market reforms. This is particularly important for policy-makers across Europe who are currently planning to undertake similar structural reforms.’

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Unit 4 Macro: Unemployment in Europe (March 2013 Update)

Tuesday, April 02, 2013


The scale and depth of the unemployment crisis in Europe is confirmed by fresh figures released by Euro Stat. Unemployment in the Euro Zone was 12.0% in February 2013 and the jobless rate for the European Union as a whole was 10.9%. Last month there were 26.3 million people counted as out of work in the twenty-seven countries within the single market, 19 million of whom live in Euro Zone countries. In the last year alone, unemployment in the Euro Zone has jumped by over 1.7 million but this aggregate figure hides large country differences and persistent regional and local variations. Here is the contextual data to take into the exam:

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OCR F585 June 2013 - Contextual Knowledge Reading Links

Saturday, March 30, 2013


Here are some links to relevant articles and research sources for June 2013 OCR F585 pre-release case study. Our own toolkit is now available - click here for details

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Unit 4 Macro: Cyprus Infographics

Thursday, March 28, 2013

Here is a selection of resources on the Cyprus banking crisis and the controversial bail-in of uninsured large depositors. Particular credit to the team at Saxo Bank for an excellent info-graphic

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OCR A2 Economics F585 The Global Economy June 2013 - Pre-Release Toolkit

Tuesday, March 19, 2013

Geoff and the team are hard at work preparing their comprehensive support pack for teachers and students preparing for OCR A2 Unit F585 on the Global Economy.  

We're hoping to have the F585 Toolkit ready to despatch by Wednesday 27 March and we'll email it out to colleagues who request it over Easter if they have already broken up for the holiday.

The OCR F585 Toolkit can be ordered directly online here or by downloading and completing this printable order form.

The Toolkit provides unrivalled analysis and evaluation of each of the 5 F585 research extracts: namely

Extract 1: The birth and growth of the eurozone

Extract 2: New EU member states and the euro

Extract 3: Estonia’s economic growth and development

Extract 4: The approach to sustainable development in the EU and Estonia

Extract 5: Estonia’s progress towards sustainable development


Evaluating UK economic performance

Friday, March 15, 2013

Robert Peston has an interesting piece on his BBC blog, considering what the UK's GDP growth would look like if it was possible to extract what he calls the 'bad bits' - financial services and North Sea oil and gas extraction - both of which are in serious decline. He suggests that we have been too dependent on these two sectors, and that both are now in serious decline. In particular, that the global financial services industry is now protecting itself by becoming much more national and less internationally interconnected, so that the City - as the world's most open and global financial centre - has therefore suffered.

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Unit 4 Macro: The UK Economy and the Euro

Sunday, February 10, 2013


Mark Austen considers whether the UK economy has on balance benefited from being outside of the Euro Area in recent years

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Unit 4 Macro: The UK Economy Outside of the Euro Area

Monday, February 04, 2013

Evaluating the UK’s macro performance outside of the Euro Zone


  • Decision made in 2003 that the UK would remain outside of the single currency
  • UK remains a full member of the single market
  • Supportive of further EU enlargement but distanced from deeper fiscal / banking intregration

Crucial question both in the short and medium term is whether non-participation in the Euro makes a significant difference to key macro outcomes

  • Real GDP growth, estimated Trend growth (LRAS)
  • Core CPI inflation and inflation expectations
  • Employment and unemployment rates
  • Trade balances (with EU and beyond)
  • Trends in relative productivity and per capita incomes


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Unit 2 Macro: Video Resources on the German Economy

Sunday, February 03, 2013

Having German exchange students in my lesson has provided a super opportunity to discuss the position of the German economy within the Euro Area and to compare and contrast macroeconomic indicators between the UK and Europe's largest economy. Here is a selection of some of the video clips that have been used as prompts for discussion.

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Unit 4 Macro: Data Charts on the Euro Economy

Monday, January 21, 2013


I am teaching aspects of the European single currency this week, naturally there are many charts that tell important stories about the macro challenges facing countries inside the euro area. I have made a file of charts available for download and I hope this might be of help to teachers covering the Euro for Unit 4 macro. See the link below:

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Unit 4 Macro: The Great Spanish Crash

Tuesday, January 01, 2013

Here is a link to Paul Mason's recent documentary on the rise and fall of the Spanish economy. A superb hour on the travails of one of the key countries inside the Euro Zone

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Unit 4 Macro: Britain’s Future in the European Union

Thursday, December 27, 2012

There has been plenty of discussion in recent weeks about whether Britain might seriously start to consider leaving the European Union? Here is a selection of news pieces and discussion videos on the vexed question of UK membership.

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A Very European Break Up - New Romantic Comedy

Wednesday, September 19, 2012

What a fabulous new resource for students and teachers! She's German. He's Greek. Can their ten year relationship survive the pressure? This great short comedy from director Bob Denham is jam packed with references to the Euro debt crisis - show it to your class and see how many the A-Level student gets (offer a prize!)

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Unit 4 Macro: Can Spain Remain Competitive?

Tuesday, July 17, 2012

Competitiveness will be key to Spain’s prospects of a durable economic recovery and the chances of cutting debt. Spain would probably benefit from a devaluation of her currency but there are other factors that drive competitiveness in global markets. Indeed there are plenty of large and medium large Spanish businesses that have growth and export potential even if Spain stays within the Euro Zone. The growing share of Spanish service exports is a good sign especially in the areas of financial services and engineering. 

This FT video looks at what Spain might do to bolster overall competitiveness including a focus on research and development and innovation together with economic reforms designed to raise productivity.

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The Eurozone Crisis Flow Chart

Tuesday, June 19, 2012

A useful series of flow charts on the BBC Business Webpage outlining some of the causes and effects of the present problems of the Eurozone economies.

A good starting point for AS students and teachers preparing for A2 Economics courses.

How much do you understand about the euro crisis?

Saturday, June 16, 2012

Tempting, I think, as an extension activity with year 12 students who are returning from their AS exams and starting on A2 courses, to put this happy Irish picture up on the whiteboard on Monday morning and ask them to explain the message on the flag.

Perhaps a prize for the most on-the-ball answer?

Who’s afraid of the Euro crisis?

Thursday, June 14, 2012

What are the possible ripple effects of the euro crisis? There are a myriad of different opinions about what might happen and how far it might go.

This interactive graphic from the BBC website is a neat summary of just some of them - it starts with Greece itself, with comparisons to the debt crises in Spain, Portugal and Ireland then looks at the potential contagion effects of a collapse of confidence in Italy.

This may spread to banking meltdown in France, the UK and the ECB, with a Euro break-up rippling through the German and wider EU economies. As a result of the interdependence of the EU and its worldwide trading partners, global meltdown follows - which explains why Christine Lagarde of the IMF has been calling for more leniency towards Greece and other borrowers, and more action in Europe to boost growth.

Is there some way in which such negative multiplier effects can be avoided? Can macroeconomic policies be used somehow to protect domestic economies from the fallout? If they cannot, what next? This resource only presents one set of ideas, but might just help students to tease out some of the convoluted and complex issues which dog the EU and global economy at present.

End Depression Now! Paul Krugman at the LSE

Wednesday, May 30, 2012

Paul Krugman made an impassioned plea for a reversal of austerity policies in a talk to a packed Peacock Theatre at the LSE in London last night - I was live tweeting the event and I have brought together these tweets and some other comments together with some of the charts in his talk. I have also drawn on the live tweets of Stuart Foster whose excellent twitter feed can be found here: @econbant

The slides from Krugman’s talk at the LSE can be found here

Paul Krugman talks to Evan Davis on the Radio 4 Today programme: Click here Niall Ferguson provides a contrary view here: ‘You can’t solve debt with more debt’ See also: European Commission supports UK deficit-cutting course (BBC news)

 

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Euro crisis hits Eurovision

Saturday, May 26, 2012

Amidst the depths of concern about where the Greek crisis and the eurozone might take us, can I offer a lighter note. Putting aside UK contingency planning to deal with mass immigration and Bankia’s request for a 19bn bailout, perhaps the ultimate indicator of the crisis is the news that Spanish TV has instructed their entrant to the Eurovision Song Contest that she is not to win.

If Pastora Soler wins with her ballad Quedate Conmigo (Stay With Me), then according to the rules of the contest the public broadcaster of the nation that wins must host the following year. And Spain’s broadcaster TVE cannot afford that at the moment.

Surely this explains how/why countries choose their Eurovision entry, and is a great example of game theory which we should use in the classroom?

Greek Euro Exit Flowchart

Friday, May 25, 2012

Here’s a good one for the end of the week, if you want a discussion regarding the possible outcome(s) of the € currency crisis, or a handy revision tool. This Guardian interactive page is very helpful.

Peston on The Eurozone

Thursday, May 17, 2012

As the Eurozone continues to be bufferted by instability in Spanish Banks, and uncertainty over Greek membership of the single currency. Robert Peston fronts a programme on The Euro on BBC2 tonight.

It remains to be seen if he offers any answers to Mervyn King’s observation, that the UK biggest trading partner, the euro area, is “tearing itself apart without any obvious solution,”

Unit 2 Macro: Bank Cuts UK growth Forecast for 2012

The quarterly Inflation Report is an opportunity for the Bank of England to flesh out their latest forecasts and thoughts on the direction of the UK economy and it is safe to say that the May report will probably be best remembered for a remarkable statement from the Bank of England Governor Mervyn King.

“We have been through a big global financial crisis; the biggest downturn in world output since the 1930s; the biggest banking crisis in this country’s history; the biggest fiscal deficit in our peacetime history; and our biggest trading partner, the euro area, is tearing itself apart without any obvious solution. The idea that we could reasonably hope to sail serenely through this with growth close to the long-run average and inflation at 2 per cent strikes me as wholly unrealistic.”

In short:

* Economic growth for 2012 - forecast has been cut to just 0.8%
* Consumer spending will continue to fall this year as real living standards for millions of people are squeezed
* The rising cost of borrowing in the wholesale money markets is increasing costs for banks and is putting upward pressure on the price of business loans and mortgages
* Now sees significant chance of negative annual GDP growth in 2012. Raises near term inflation forecast - CPI inflation inflation to fall back to target before the middle of 2013
* It may take a long time to get the UK economy back to previous growth / inflation paths: ““There’s no obvious reason to believe we can’t get back to original path [of economy pre-crisis] but may take 10/15/20 years” - a realisation of the severity of the shock to the global financial system and the aftermath
* Weak growth forecasts for 2012 assumes that there will not be a collapse / breakup of the single currency

Bank governor warns of eurozone crisis ‘storm’


Bank of England warns of euro crisis ‘storm’ (BBC news video)

A sticky wicket for the Bank (Stephanie Flanders)

Bank of England Inflation Report Data Sections

 

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Eurozone Crisis - Lessons Learnt

Wednesday, May 16, 2012

Last week I attended a very interesting lecture at the LSE on the Eurozone crisis, given by Leszek Balcerowicz, a Polish economist who is former chairman of the National Bank of Poland and Deputy Prime Minister.

The following blog outlines his thoughts, but also includes useful links to articles to read.
Using the crisis as a case study will hugely benefit A2 students as it encompasses many of the topics covered in the syllabus.

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Grexit - Andrew Balls on Greece and the Euro

Following on from Ben Christopher’s article, a BBC Radio 4 interview with Andrew Balls, an investment fund manager, and younger brother of The Shadow Chancellor on the possibility of a Grexit - Greek exit from the Euro.

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Unit 4 Macro: The Euro Zone Crisis (Revision)

Sunday, April 22, 2012

Here is a revision blog on some of the key economic challenges facing the seventeen member nations of the Euro Zone or Euro Area

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Unit 2 Macro: Revision on Interest Rates and the Exchange Rate

Tuesday, April 03, 2012

The exchange rate measures the external value of sterling in terms of how much of another currency it can buy. E.g. in July 2011 £1 would buy you $1.65 and Euro 1.17. The daily value of the currency is determined in the foreign exchange markets (FOREX) where billions of $s of currencies are traded every hour. The value of the pound in the currency markets depends in how strong is demand for the currency relative to supply

Many factors affect the external value of one currency against another and one of these factors is the level of interest rates in a country compared to other economies. Money moves around the world economy seeking the best risk-adjusted rate of return. The rate of interest available on deposit in the banking system of a particular country is a factor that might drive what are known as “hot money” flows into and out of a particular currency.

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