How do exchange rates affect the economy?

How  do  exchange  rates   affect  the  economy?   Learning  objec-ve:   To  analyse  the  impact  of  floa-ng   exchange  rate  systems  upon  the   economy  

Exchange  rate  (USD)  

Starter   SGBP  

1.68   1.44  

DGBP   Q1   Q2  

Quan-ty  (GBP)  

DGBP1  

Task  –  25  minutes   •  In  pairs  you  need  to  research  a  range  of   ways  in  which  increasing  and  decreasing   exchange  rates  can  affect  the  performance   of  the  economy.   –  Use  the  GCSE  and  A-­‐level  text  books   –  Present  your  informa-on  on  an  A3  piece  of   paper   –  Use  appropriate  diagrams  to  illustrate  your   points  

Homeostasis  (kind  of)   Value  of  currency   Depreciates   (decreases)   Demand  for  exports   Increases,  imports   increases   Value  of  currency   Appreciates   (increases)   Demand  for  exports   decreases  

Balance  of  payments   surplus  

Neutral  balance  of   payments  

Value  of  currency   Appreciates   (increases)   Demand  for  exports   decreases   Value  of  currency   Depreciates   (decreases)  

Balance  of  payments   Deficit  

Demand  for  exports   Increases,  imports   increases