Theme 4

Question 1

What is a floating exchange rate?

Answer 1

Floating= ER determined by supply and demand.

Question 2

What impacts the demand for the currency determined by?

Answer 2

• Demand for exports from abroad.
• Inflows of hot money
• Speculation of currency appreciation.
• Remittances sent back to the Uk from workers abroad.

Question 3

What impacts the supply of the currency?

Answer 3

• Demand for imports into the UK.
• Outflows of money
• Speculation of a currency depreciation.
• Remittances sent from overseas workers in the UK.