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3.2 Exchange Rates

3.2 Exchange Rates. Exchange Rate – how much of one currency you can buy using another currency. IE: £1 = $1.50. What does it mean if the £ is STRONG?. We can buy MORE of the foreign currency than before IE: If in 2012 £1 = $1.50 and in 2013 £1 = $2.00

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3.2 Exchange Rates

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  1. 3.2 Exchange Rates

  2. Exchange Rate – how much of one currency you can buy using another currency. • IE: £1 = $1.50

  3. What does it mean if the £ is STRONG? • We can buy MORE of the foreign currency than before • IE: If in 2012 £1 = $1.50 and in 2013 £1 = $2.00 • This means we get MORE dollars for £1 than we did before. • A strong pound means IMPORTS from other countries are CHEAPER for UK citizens. • IE: If something costs $30, it will cost us £20 in 2012 and £15 in 2013 • A strong pound means UK EXPORTS to other countries become more EXPENSIVE for foreign customers. • IE: If something costs £10, it will cost Americans $15 to buy it in 2012 and $20 to buy it in 2013

  4. What does it mean if the £ is WEAK? • We can’t buy as much of the foreign currency as before • IE: If in 2012 £1 = $1.50 and in 2013 £1 = $1.00 • This means we get LESS dollars for £1 than we did before. • A weak pound means IMPORTS from other countries are more EXPENSIVE for UK citizens. • IE: If something costs $30, it will cost us £20 in 2012 and £30 in 2013 • A weak pound means UK EXPORTS to other countries become CHEAPER for foreign customers. • IE: If something costs £10, it will cost Americans $15 to buy it in 2012 and $10 to buy it in 2013

  5. How do changes in Exchange Rates affect us? • Foreign holidays • Withdrawing cash from cash machines abroad • Food in supermarkets • Imported consumer goods

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