Exchange Rates

Question 1

What are exchange rates?

Answer 1

exchange rates reflects the value of a currency compared to another

Question 2

Name 4 factors that influence the exchange rate

Answer 2

strong economy
speculation
interest rates
inflation

Question 3

What does WPIDEC stand for?

Answer 3

weaker
pound
imports dearer (more expensive)
exports cheaper

Question 4

What happens if the £ weakens?
(in terms of imports +exports)

Answer 4

a weaker pound leads to more expensive imports and cheaper exports

Question 5

What happens if exports are cheaper?

Answer 5

demand decreases as this signals to the consumers the quality might not be as good

Question 6

What are 5 effects of a weakening £?

Answer 6

exports cheaper
imports more expensive
inflation
higher economic growth
improving current account

Question 7

What does SPICED stand for?

Answer 7

strengthening
pound
imports cheaper
exports
dearer (more expensive)

Question 8

What happens if the £ strengthens?
(in terms of imports +exports)

Answer 8

a strengthening pound leads to cheaper imports and more expensive imports

Question 9

What are 5 effects of a strengthening £?

Answer 9

more expensive exports
cheaper imports
less inflation
current account deficit deterioration
fall in economic growth due to a fall in domestic deamnd