Download Impact of exchange rates

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