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GCSE Business Studies The impact of Exchange Rates Beauchamps High School by the end of this lesson students…. Evaluation ~ GCSE Grade A* • Will be able to evaluate the importance of exchange rates in costs of a business Synthesis~ GCSE • Will be able to propose factors that affect the value of a currency Analysis ~ GCSE • Will be able to analyse the effect of exchange rates on a business Grade A Grade B Application ~ GCSE • Will be able to demonstrate understanding by using examples/cases Comprehension ~ • Will be able to explain the importance of exchange rates for a business Knowledge ~ GCSE • Will be able to recall key term exchange rate Grade C GCSE Grade D Grade E Exchange Rates Price of buying foreign currency. It tells you how much of the foreign currency you will get for every pound Beauchamps High School Importance for business Buying raw materials and selling products from foreign countries Imports Exports Beauchamps High School Imports Purchase of a good or service from a foreign business that leads to a flow of money out of the UK UK buyer will have to change pounds into the seller’s currency to make the transaction Can you think of any examples of imports? Beauchamps High School Exports Sale of good or service to a foreign buyer that leads to a flow of money into the UK Foreign buyer will have to change their currency into pounds to complete the transaction Can you think of any examples of exports? Beauchamps High School Calculating Exchange Rates RULE 1: When exchanging from £s to a foreign currency, MULTIPLY E.g £1 = $1.80 £200 Burberry jacket should sell in New York for £200 x $1.80 = $360 Beauchamps High School Calculating Exchange Rates RULE 2: When exchanging from a foreign currency to £s, DIVIDE E.g £1 = $1.80 $900 Calvin Klein suit should sell in Britain for $900 / $1.80 = £500 Beauchamps High School Changes in exchange rates The exact price of foreign currencies goes up and down on a minute-by-minute basis The fall and rise in the value of the pound can impact on small businesses Beauchamps High School The effects of Exchange Rate changes Strong Pound Weak Pound £1 = 2 euros (€) Good for British £1 = 1 euro (€) Good for foreign travelling abroad Bad for UK business exporting to Euro zone Good for importing from Euro zone tourists Good for Uk business exporting to Euro zone Bad for importing from Euro zone The effects of Exchange Rate changes In order to remember the effect that a change in exchange rates has use the following acronym S trong P ound I mports C heap E xports D ear Other factors that will affect the value of a currency Demand and supply for the currency Interest rates – rising interest rates is more attractive. Falling interest rates decreases value Against the Clock Now Feedback to class Task Beauchamps High School Task Watch the video: http://news.b bc.co.uk/1/hi /england/77 92356.stm Beauchamps High School Homework Research task – investigate exchange rates over last 5 years – Pound/Euro and Pound/Dollar – create graph showing pattern Write a paragraph for each explain the graphs show and which businesses would benefit from the changes Beauchamps High School www.businessstudiesonline.co.uk/live/index.php?option=c om_content&view=article&id=5&Itemid=10 Beauchamps High School Plenary The Chase rules One student selected to answer a question from lollipop sticks If a student is unable to answer a question they can select someone else to answer “The Chaser” Can you beat the chaser and get the high grade! Can you….. Recall the key term exchange rate Explain the importance of exchange rates for a business Demonstrate understanding by using examples/cases Analyse the effect of exchange rates on a business Propose factors that affect the value of a currency Evaluate the importance of exchange rates in costs of a business by the end of this lesson students…. Evaluation ~ GCSE Grade A* • Will be able to evaluate the importance of exchange rates in costs of a business Synthesis~ GCSE • Will be able to propose factors that affect the value of a currency Analysis ~ GCSE • Will be able to analyse the effect of exchange rates on a business Grade A Grade B Application ~ GCSE • Will be able to demonstrate understanding by using examples/cases Comprehension ~ • Will be able to explain the importance of exchange rates for a business Knowledge ~ GCSE • Will be able to recall key term exchange rate Grade C GCSE Grade D Grade E