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Factors Driving Changes in Exchange Rates


Analyse the causes of an increase in a country’s exchange rate.


International Trade and Exchange Rates

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I. 🍃Introduction
- Explanation of the topic
- Purpose of the outline

II. Change in market conditions for a floating exchange rate
- Definition of floating exchange rate
- Increase in demand for the currency
- Cheaper exports/higher quality exports
- Greater demand for exports
- Higher interest rates may increase demand for financial investment
- Speculation that the currency may rise further
- Decrease in supply of the currency
- More expensive imports/poorer quality imports/trade barriers
- Lower demand for imports
- Lower interest rates may cause inward financial investment (hot money) to fall

III. Government decision to raise the value of the currency for a fixed exchange rate
- Definition of fixed exchange rate
- Reasons for government decision
- Effects on the economy
- Advantages and disadvantages of fixed exchange rate

IV. 👉Conclusion
- Summary of the main points
- Implications for the economy
- Future outlook for the currency exchange rate.

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