Specification DetailExplain what exchange rates areHow changes in the £/$ or £/€ affect small firms thattrade abroad or face competition from abroadThe impact of changing exchange rates on the priceof imported and exported goodsHow to calculate exchange rates on product pricesQuestions will look only at £ v $ or £ v €
What is the exchange rate?The rate of exchange (exchange rate) shows thevalue of one currency measured by how much it willbuy of another currency. Here
Printing moneyWhat happens if there is an over supply of money?
What if everyone wanted pounds Investors need pounds to invest in the UK Traders need pounds to buy items in the UK .
Changes affecting small businessTrading from abroad If the pound weakens, imports become more expensive If the pound weakens, UK exports will become cheaper for international customers. If the pound strengthens, imports will seem cheaper If the pound strengthens, exports will decrease, because they seem more expensive to international customers.Competition from abroad If the pound weakens, it will be more difficult for competition abroad If the pound strengthens, foreign produce will seem cheaper, customers may buy from there.
How to calculate For the following currencies, calculate the conversion. £v$ How much $ would you have if you changed $50. How many £ would you have if you changed £50 £v€ How many £s would you need to get €50 How many €s would you need to get £50