Exchange rate

Question 1

exchange rate

Answer 1

value of 1 currency expressed in terms of another

Question 2

SPICED

Answer 2

a strong pound makes imports cheap and exports dearie

Question 3

demand and supply of ER

Answer 3

demand derives from demand for a countries exports ~ more exports you sell, the more currency will be demanded

supply depends on domestic demand for imports ~ more imports, the greater the supply of currency

Question 4

changing ER

Answer 4

rise :

• fall in demand for exports ~ job losses as few needed ~ low demand and EG
• imports cheap ~ import more ~ BoP worse

fall :
- inflation as price of imports increase ~ demand for UK goods