Exchange Rates Flashcards
1
Q
What is a Strengthening Exchange Rate?
A
When the pound increases in value. This means that a pound will buy MORE of a foreign currency. Exports cheaper
2
Q
What is a Weakening Exchange Rate?
A
When the pound decreases in value. This means that a pound will buy LESS of a foreign currency.
3
Q
Import=
A
A sale which leads to money EXITING the economy
4
Q
Export=
A
Money ENTERING an economy
5
Q
What does the acronym SPICED stand for?
A
Strong Pound Imports Cheap Exports Dear
6
Q
What is an Exchange Rate?
A
The value of one currency in terms of another
7
Q
How is the exchange rate set?
A
The forces of supply and demand establishes the exchange rate
8
Q
How does the demand for the £ increase?
A
- Exports= if the UK is selling goods abroad they can’t pay with their currency so they have to pay with £. Therefore demand goes up
- Hot Money= country wants somewhere with the highest interest rate so they get more for their money
- Foreign Investment in the UK= have to pay in £
9
Q
Balance of Trade=
A
Difference between the value of exports and imports
