Foreign Exchange and Trade Topic 10

Euro, Australian dollar, yen & dollar Exchange Rates If you change £300 and the exchange rate is £1 : $1.50, how many dollars will you get? $300 $450 $500 Which two of the following are abbreviations for foreign exchange? Forex, FX, FE, Fex What are the currencies of the EU, Australia, Japan and the USA? € Aus$ ¥ $ A foreign worker ‘wring money home’ is also known as? Remittances, exchanges, barter A worker sending money back to their own country will? Benefit the UK economy, damage the UK economy Where do most travellers exchange their money at airports? Exchange booth, currency exchange, bureaux de change A strong pound benefits which 2 of the following? UK foreign tourist, UK Exporters, Importers, Balance of Payments, UK economy A weak pound will do which 4 of the following? Boost the economy, create jobs, cause unemployment, increase exports, reduce inflation, increase imports, increase inflation Which 2 of these will help increase the value of the pound? UK exports increasing, UK imports increasing, people buying pounds, people buying dollars with pounds A strong pound will mean that imports are? Cheaper or Dearer A weak pound will do what to the demand for locally produced UK goods? Increase or decrease the demand for them Which has the biggest impact on the pound? Imports & exports, interest rates, tax, tourism Which is best for business? A fluctuating currency or a stable currency How does a government support (increase in value a currency)? Buy it or sell it Is a strong pound good or bad for British tourism? Is a strong pound good or bad for British importers such as Matalan? What is the word that describes a currency that has fallen in value? Devaluation, appreciation, realignment What is the term known as where local goods compete with foreign imports? Import-competing or localisation What currency’s abbreviation is JPY? Euro, Australian dollar, yen & dollar Japanese Yen

Strong or Weak pound? Imagine that the value of the pound is strong. State whether the following firms will benefit form a strong pound or whether it will be detrimental. detrimental 1. Rolls Royce exporting aero-engines to the USA Benefit 2. BMW importing cars for sale in the UK detrimental 3. A British textile producer who produces and sells shirts in the UK 4. British Airways who have to pay in US dollars for all is fuel Benefit 5. Curry’s who buys most of its electrical goods from overseas Benefit 6. Liverpool FC who wish to prevent a hostile takeover bid from the USA Benefit Benefit 7. BT wanting to takeover an American telephone company detrimental 8. A British firm exporting a price inelastic product

Select from the list below which would benefit from a strong pound and which it would be detrimental to; a) Toyota wanting to set up a factory in the UK b) British Airways wishing to takeover Qantas c) Land Rover selling cars in the UK d) Jaguar’s exports to the USA e) A French water company wishing to buy shares in Severn Trent f) Raleigh bikes who imports its components from abroad Detrimental Benefit

Courthalls 50 cents cheaper The exchange rate is £1 : $1.50 A British manufacturer called Courthalls is selling T-shirts for £3 each. The sell both in the UK and also export to the USA. They sell around 1,000 per month to the USA. Their main competitor in the USA is Uncle Sam’s Shirts who sells a similar style T-shirt for $5 each. $4.50 How much would a Courthalls’ T-Shirt sell for in the USA? How much revenue from the USA will Courthalls’ receive? What currency will they be paid in as a British firm? If you were an American shop, would you buy your stock from Courthalls or Uncle Sam’s Shirts? Explain your answer. How much would an imported shirt from Uncle Sam’s Shirts retail for in the UK? Would they sell many? Explain your answer. £3,000 pounds Courthalls 50 cents cheaper £3.33 No

They would lose sales both in the US and in the UK domestic market The exchange rate changes from £1 : $2 All other factors remain the same. $6 How much would a Courthalls’ T-Shirt sell for in the USA? If you were an American shop, would you buy your stock from Courthalls or Uncle Sam’s Shirts? Explain your answer. How much would an imported shirt from Uncle Sam’s Shirts retail for in the UK? Would they sell many? Explain your answer. Has the pound become stronger or weaker? How has it affected Courthalls? Explain your answer. No, US $1 cheaper £2.50 Yes cheaper Stronger They would lose sales both in the US and in the UK domestic market

Exchange Rates If you change £300 and the exchange rate is £1 : $1.50, how many dollars will you get? $300 $450 $500 Which two of the following are abbreviations for foreign exchange? Forex, FX, FE, Fex What are the currencies of the EU, Australia, Japan and the USA? € Aus$ ¥ $ A foreign worker ‘wring money home’ is also known as a? Remittances, exchanges, barter A worker sending money back to their own country will? Benefit the UK economy, damage the UK economy Where do most travellers exchange their money at airports? Exchange booth, currency exchange, bureaux de change A strong pound benefits which 2 of the following? UK foreign tourist, UK Exporters, Importers, Balance of Payments, UK economy A weak pound will do which 4 of the following? Boost the economy, create jobs, cause unemployment, increase exports, reduce inflation, increase imports, increase inflation Which 2 of these will help increase the value of the pound? UK exports increasing, UK imports increasing, people buying pounds, people buying dollars with pounds A strong pound will mean that imports are? Cheaper or Dearer A weak pound will do what to the demand for locally produced UK goods? Increase or decrease the demand for them Which has the biggest impact on the pound? Imports & exports, interest rates, tax, tourism Which is best for business? A fluctuating currency or a stable currency How does a government support (increase in value a currency)? Buy it or sell it Is a strong pound good or bad for British tourism? Is a strong pound good or bad for British importers such as Matalan? What is the word that describes a currency that has fallen in value? Devaluation, appreciation, realignment What is the term known as where local goods compete with foreign imports? Import-competing or localisation