gcse economics - international trade - exchange rates
Exchange rate: - the price at which one currency is bought and sold
for another
e.g.
£1 = $1.5 UK and USA
£1 = 200 yen UK and Japan
A £1 coin can be sold to buy $1.5 or 200 yen
In order to obtain a £1 coin an American would have to offer $1.5 and a Japanese person 200 yen.
CHANGES IN THE VALUE OF THE £
The value of the £ changes daily against other currencies. It could become stronger or it could become weaker
VALUE YESTERDAY |
VALUE TODAY |
EFFECT |
£1 = $1.5 |
£1 = $1.6 |
£ stronger or increased in value |
£1 = $1.5 |
£1 = $1.4 |
£ weaker or fallen in value |
£1 = 200 yen |
£1 = 220 yen |
£ stronger or increased in value |
£1 = 200 yen |
£1 = 180 yen |
£ weaker or fallen in value |
WHY DO EXCHANGE RATES MATTER?
1. They influence the price of imports
2. They influence the price of exports
3. They effect tourism. Changes in exchange rates influence how much money
you receive when you change your currency
4. They can effect firms profits
5. They can have an effect upon unemployment, inflation, economic growth
and the balance of payments.
ACTION
a. How much currency did you receive on your last visit abroad?
b. How did you work out the amount you would receive?
c. How about when you changed it back into £
These GCSE Economics revision notes have been kindly provided by Peter Davies of Mill Hill School, Ripley Keep Up-todate with your GCSE Economics - Subscribe Free to Economics in the News by Email
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