2.1.4 External Influences: Exchange Rates

Question 1

What is Exchange rate?

Answer 1

An exchange rate is the value of one currency expressed in terms of another.
For example: the value of the £ is expressed as:
worth $1.31, + €1.11

Question 2

What happens when a currency appreciates?

Answer 2

A currency that is getting stronger (or appreciating) is a currency that is going up in value against another
For example: £1 : $1.54 moving to £1 : $ 1.84 means the pound is getting stronger

Question 3

What happens when a currency depreciates?

Answer 3

A currency that is becoming weaker or depreciating is a currency that is going down in value against another
For example: £1 : $1.54 moving to £1 : $1.3 means the pound is getting weaker

Question 4

Who currency fluctuations impact?

Answer 4

• Business exports in the uk using the weaker pound

- Businesses paying from the uk using a weaker pound will cost more

Question 5

How are currency fluctuations impacted?

Answer 5

• Cheaper for costumers buying our products and they get more for their money
• The products will cost them more: put price up and imapacts the costumer

Question 6

What is the potential impact of a stronger £GBP?

Answer 6

People will invest in our businesses if they know there will not be a huge change in our currency

Question 7

How might exchange rate fluctuations affect businesses?

Answer 7

• Increase or lower the price of a product sold abroad
• Change the price of imported raw materials
• Change price of competitors products may change in the home market

Question 8

Importers

Answer 8

Businesses that buy goods from overseas

Question 9

Exporters

Answer 9

Businesses that sell goods overseas