1 / 13

National & Global Economy

GCSE ECONOMICS: UNIT 11. National & Global Economy. 3.2 Exchange Rates. Aims of today’s lesson …. Understand how exchange rates influence demand for imports and exports of goods and services Identify the non-price factors that affect the sales of imports to, and exports from the UK

havard
Download Presentation

National & Global Economy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. GCSE ECONOMICS: UNIT 11 National & Global Economy 3.2 Exchange Rates

  2. Aims of today’s lesson … • Understand how exchange rates influence demand for imports and exports of goods and services • Identify the non-price factors that affect the sales of imports to, and exports from the UK • Analyse the effect that exchange rates have on the individual consumer

  3. Talkabout….International Trade Exports Imports Deficit BOP Surplus Globalisation Services Goods

  4. Exchange Rates • Every time a UK citizen or business wants to buy something from abroad, they need to pay for that product in the currency where it is produced • Example: When Helen buys original Ugg Boots from Australia and imports them to the UK she needs to buy Australian dollars to pay for them Q. What other reasons might a person require foreign currency for? $150

  5. Exchange Rates cont… • The amount a person has to pay for this foreign currency depends on the Exchange Rate • This is the rate at which one currency (e.g. £’s) exchanges for another (e.g. €’s) • Exchange rates change every day, so the foreign currency you could buy for £1 today may not be the same tomorrow • The exchange rate, and the fact that it changes on a daily basis, has serious financial consequences for businesses and consumers

  6. The effects of the exchange rate on importers… • In October 2000 you could buy €1.75 for £1 • In December 2008 the value of the pound had fallen, meaning that you could buy €1.14 for £1 • How would this fall in the value of the pound (i.e. the exchange rate) affect importers of goods and services to the UK?

  7. Exchange Rates cont… • Example: Imagine you want to buy some perfume from France which is priced at €10 • If the exchange rate means you get € 1 for every £1 then the perfume costs you £10 Q. If the exchange rate changes meaning you now only receive € 0.50 for every €1; how much will the perfume cost you in £’s? • £20 • Changes in the exchange rate therefore have huge consequences for what consumers can afford and want to buy (i.e. their demand for imports)

  8. The effects of the exchange rate on exporters… • When UK firms want to export their goods and services those foreign citizens who want them will have to buy pounds in order to pay for them • Example 1: If the exchange rate is £1:$2, every pound they want to buy will cost $2 • This means that for a good exported to the US for £10, a US citizen will need to pay $20 to buy the pounds necessary

  9. The effects of the exchange rate on exporters… • Example 2: If the exchange rate changes to £1:$1, every pound they want to buy will cost $1 • This means that for the same good exported to the US for £10, a US citizen will need now only need to pay $10 to buy the pounds necessary • UK exports will therefore be more attractive to US citizens in the second example as they are half as expensive • This is positive for UK exporters as they will sell more of their goods and services abroad

  10. Over to you… • Open and complete the task below… 3.2 Exchange Rate Examples

  11. Lets play the exchange game… • Round 1: • Exchange rate is…

  12. Case Study… • Open and complete the task below… Case Study Example

  13. Extension Tasks… • Open and complete the task below… Extension Task 1 & 2

More Related