Exchange rates
1. What are ‘exchange rates’
2. For the following, discuss the effect they would have on the value of the Pound
(£) against the Yen (¥).
 Increase in the number of UK residents visiting Japan
 The Yen coming under speculative selling pressure, as an election draws
near.
 An increase in UK aircraft sales to Japan.
 UK interest rates rise from 4% to 6%, whilst Japanese ones remain
unchanged
Use a supply and demand diagram to help show what is happening.
3. The reconstruction company rebuilds Land Rovers and exports them to South
Africa. It has exported 5 reconditioned vehicles for use on game reserves,
selling each one for 120,000 Rand. The exchange rate at the time was £ = 10
Rand.
 Calculate the total earnings in both Rands and Pounds for the business.
 The exchange rate fell over the next year to £1 = 9.6 Rand. Calculate the
new prices in both currencies.
 What other option did the company have? What would haveinfluenced
that choice?
4. Using numerical examples. Show what effect a rising exchange rate will have on
a company that faces competition from foreign firms.
The following are for you to think about. Make some brief notes (Bullet points are OK),
and be ready to feed back your ideas to the rest of the class.
5. How can companies maintain competitiveness in the face of a high exchange
rate?
6. What would be the impact of a high exchange rate on unemployment?
7. Which business are likely to survive a time of high exchange rates?
Exchange rates worksheet
Business Studies IGCSE