Influences on business Flashcards
What is an exchange rate?
An exchange rate is the price at which one currency can be traded for another.
What do exchange rates tell you?
How currencies compare.
How do exchange rates convert between currencies?
2 points
1) If a company wants to import products, they have to pay for the product in the currency of the country it was made in.
2) Exchange rates are affected by the economy of the country that uses the currency and by the global economy. In result of this they cane change over time.
What would happen if the value of the pound decreases?
You would be buying a fewer amount of the other currency.
What happens when the pound is cheaper?
British exports become less expensive abroad which would result in more sales and higher profits for the British firms that export products to other countries.
Why is a strong pound bad for exporters but good for importers?
1)Because an increase in the value of the pound makes exports more expensive and imports cheaper.
What are British firms that export products likely to notice?
Sales and profits going down so their products will be more expensive resulting in fewer people purchasing them.
What are British firms that import raw materials likely to notice?
Make products more cheaply, so profits might go up.
