AS Economics. The story so far. The value of the pound is measured in terms of its exchange rate, that is, the amount of foreign currency one pound can buy. Currency trading takes place in the Foreign Exchange Market. The value of sterling is set by the market forces of supply and demand.
This posting [...]
AS Economics. Why are exchange rate movements important?
The exchange rate affects of the price of imports and exports and so influences price competitiveness of UK products.
Here is a simple word example that shows the impact on a UK exporter , following an appreciation of sterling.
Assume two rival firms based in the UK & USA [...]
AS Economics. In a market economy, the value of the currency is determined by the interaction of supply and demand. Take for example, the dollar exchange rate. Why does one pound buy over two dollars in 2007, but only $1.35 in the spring of 2009?
Understanding why exchange rates are volatile (changeable) means understanding the motives [...]
AS Economics: many students find exchange rates a challenging topic. You need to understand how exchange rates are determined; why the the value of a currency can change; and the impact exchange rate changes on aggregate supply and demand, hence the macro economy
An exchange rate is the price of one currency in terms of another. [...]
Sterling is another name for the UK’s currency, the pound (£). Over the last 12 months the value of sterling has fallen against other currencies by 25%.
This means UK exporters can reduce the overseas price of their products and still receive the same amount of sterling because of the lower exchange rate.
For example, assume [...]
