Exchange rates - 6

Question 1

Recovery or upswing

Answer 1

Increasing consumer expenditure
Production rises
Spare capacity used
Confidence strengthens
Investment increases

Question 2

Boom

Answer 2

Inflation increases
Profits high
Some firms unable to meet demand

Question 3

Recession

Answer 3

Reduced interest rates
Reduced production
Increase in spare capacity
Profits fall
Reduced confidence

Question 4

Slump

Answer 4

Increase in bankruptcies
Lowered interest rates
High unemployment
Low confidence
Low spending

Question 5

Exchange rate

Answer 5

The price of one currency expressed in terms of another

Question 6

What happens if the pound Appreciates (rises)?

Answer 6

Exported goods increase, Imported goods decrease

Question 7

What happens if the pound depreciates (falls)?

Answer 7

Decreased exports, Increased imports

Question 8

How can exchange rates effect certainty?

Answer 8

Uncertainty over revenue - If deals are agreed with a foreign currency the total revenue may change over time

Uncertainty over quantity sold - If the pound increases price of products may increase so less is sold abroad

Uncertainty over competition - Businesses may set lower prices to try remain undetected by exchange rates which could lead to other businesses losing market share