2. STARTER: Recap… Macro effects of a currency depreciation This will have an effect on a number of key economic indicators Domestic productionTrade deficitDomestic employment Changes in import and export prices will affect demand Import volumes will CONTRACT Export volumes will EXPAND When the pound depreciates against the US dollar It makes UK import prices RISE It makes UK export prices FALL

4. Why is foreign currency bought and sold?

5. Why might their be shifts in the demand and supply curves for currency?

6. A rise in UK exports A rise in UK imports A rise in interest rates An inflow of investment funds A belief that the pound is going to fall in value

8. Pick 3 countries – what has been the pattern of their exchange rates over the last 10 years – why do you think this was?

9. How to manipulate currency?