Exchange Rates

Question 1

SPICED

Answer 1

Strong pound =
- cheaper imports eg of raw materials so higher gross profit margin
- dearer exports. so more expensive for other countries to buy so lower sales

Question 2

WPIDEC

Answer 2

Weak pound =
- dearer imports eg of raw materials so lower gross profit margin
- cheaper exports. so less expensive for other countries to buy so higher sales

Question 3

If the line is going up eg showing exchange rate of X to Y what does that mean for X

Answer 3

It is depreciating/weakening because more of it is needed to buy Y
so for X’s country:
- importing is dearer
- exporting is cheaper
(WPIDEC)
- anything X exports will be cheaper for Y to buy

Question 4

If the line is going up eg showing exchange rate of X to Y what does that mean for Y

Answer 4

It is appreciating/strenghting
so for Y’s country:
- importing is cheaper
- exporting is dearer so more expensive for other countries to buy so less salea
(SPICED)

Question 5

If the line is going down eg showing exchange rate of X to Y what does that mean for X

Answer 5

X is appreciating/strengthening
so for X’s country:
- importing is cheaper
- exporting is dearer
(SPICED)
- anything X exports will be more expensive for Y to buy

Question 6

If the line is going down eg showing exchange rate of X to Y what does that mean for Y

Answer 6

Y is depreciating/weakening
so for Y’s country:
- importing is dearer
- exporting is cheaper so cheaper for other counties to buy their products so higher sales
(WPIDEC)

Question 7

If a graph is showing the exchange rate of X to Y and is going up what does it mean

Answer 7

The currency of X is depreciating/weakening:
- so exported goods will be cheaper for Y’s customers to buy so more sales
- but imports are more expensive

Question 8

If a graph is showing the exchange rate of X to Y and is going up what does it mean

Answer 8

The currency of X is appreciating/strengthening:
- so exported goods will be more expensive for Y’s customers to buy so less sales
- imports are cheaper