Exchange Rates Flashcards
1
Q
Exchange rate diagram axis
A
y = price of currency
x = quantity of currency
2
Q
What can shift exchange rates?
A
- tourism
- imports/exports
- speculation
3
Q
Why do consumers sell pounds?
A
when they want to exchange it for another currency
(tourism and imports)
4
Q
Why do consumers demand pounds?
A
exports and domestic tourism
5
Q
Define speculation
A
when investors predict changes in a currency’s exchange rate to make a profit
6
Q
Effects of exchange rate on imports/exports
A
SPICEE
7
Q
Appreciation/depreciation on AD
A
- appreciation - decrease AD
- depreciation - increase AD
