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