GCSE Business Studies The impact of Exchange Rates Beauchamps High School

Will be able to evaluate the importance of exchange rates in costs of a business Evaluation ~ GCSE Grade A* Will be able to propose factors that affect the value of a currency Synthesis ~ GCSE Grade A Will be able to analyse the effect of exchange rates on a business Analysis ~ GCSE Grade B Will be able to demonstrate understanding by using examples/cases Application ~ GCSE Grade C Will be able to explain the importance of exchange rates for a business Comprehension ~ GCSE Grade D Will be able to recall key term exchange rate Knowledge ~ GCSE Grade E

Exchange Rates Beauchamps High School Theory Notes Price of buying foreign currency. It tells you how much of the foreign currency you will get for every pound

Importance for business  Buying raw materials and selling products from foreign countries  Imports  Exports Beauchamps High School Theory Notes

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 Theory Notes

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 Theory Notes

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 Theory Notes

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 Theory Notes

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  £1 = 2 euros (€)  Good for British travelling abroad  Bad for UK business exporting to Euro zone  Good for importing from Euro zone Weak Pound  £1 = 1 euro (€)  Good for foreign tourists  Good for Uk business exporting to Euro zone  Bad for importing from Euro zone Theory Notes

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 Theory Notes

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

Task Beauchamps High School

Task  Watch the video:  bc.co.uk/1/hi /england/ 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

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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!

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 Can you…..

Will be able to evaluate the importance of exchange rates in costs of a business Evaluation ~ GCSE Grade A* Will be able to propose factors that affect the value of a currency Synthesis ~ GCSE Grade A Will be able to analyse the effect of exchange rates on a business Analysis ~ GCSE Grade B Will be able to demonstrate understanding by using examples/cases Application ~ GCSE Grade C Will be able to explain the importance of exchange rates for a business Comprehension ~ GCSE Grade D Will be able to recall key term exchange rate Knowledge ~ GCSE Grade E