Effect Of Exchange Rate

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Effect Of Exchange Rate

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Effect Of Exchange Rate

  1. 1. xchange Rat Meaning Effect of falling rate Trend Tasks Click on a shape
  2. 2. xchange Rat <ul><li>It is the value of a currency measured against a foreign currency. </li></ul>
  3. 3. xchange Rat <ul><li>It varies from time to time. </li></ul><ul><li>It reflects the strength of an economy . </li></ul>Go back
  4. 4. Effect of Falling Exchange Rate <ul><li>Increases </li></ul><ul><li>Our exports competitiveness. </li></ul><ul><li>Exports. </li></ul><ul><li>Price of imports. </li></ul><ul><li>Reduces </li></ul><ul><li>Price of exports </li></ul><ul><li>Imports </li></ul><ul><li>The foreign firms’ share in our markets. </li></ul>
  5. 5. Effect of Falling Exchange Rate <ul><li>Reducing the price of exports makes </li></ul><ul><li>them more attractive and competitive. </li></ul><ul><li>Look at the following example: </li></ul><ul><li>£1000 = $2000 in 1999 </li></ul><ul><li>£1000= $1000 in 2000 </li></ul><ul><li>The above example makes our products more </li></ul><ul><li>attractive to the US consumers. </li></ul><ul><li>This would eventually lead to an increase in </li></ul><ul><li>exports. </li></ul>
  6. 6. Go back Drop in exchange rate Reduce price of exports Increase demand for exports Increase demand for local factors of production Increase employment Increase local demand Increase sales Profit
  7. 7. Exchange Rate to the 0 0.5 1 1.5 2 2.5 90 92 94 96 98 00 02 04 06 Exchange rate Year Go back
  8. 8. Exchange Rate <ul><li>Task 1 </li></ul><ul><li>When you go away on a holiday do you want the value of the £ to be high or low? Explain your answer. </li></ul><ul><li>When an American tourist comes to the UK does he/she wants the value of the £ to be high or low? Explain your answer </li></ul>
  9. 9. Exchange Rate $ to the £ <ul><li>Task 2 </li></ul><ul><li>Explain what happened to the value of the £ between 2000-2006. </li></ul><ul><li>Explain the impact of this trend on UK Businesses. </li></ul>
  10. 10. Impact of Exchange Rate <ul><li>Task 3 </li></ul><ul><li>Indicate which of the following businesses are more likely to be affected by the changes in exchange rate between the £ and the Euro or the £ and the $. </li></ul><ul><li>Justify your answer. </li></ul>
  11. 11. Impact of Exchange Rate Go back

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