HL+Exchange+Rates

The type of question you may get on P3 is all to do with how exchange rates are determined. This just uses the familiar linear Demand Curves. Work through the exercises in Dorton and Blink P 292-3. Also you may need to do some basic calculations of exchange rates and how changes in exchange rates affect imports and exports.

An example: Initially the exchange rate is $4: 1 pound How much would UK goods costing 10 Pounds sell for in the US What would their price be if the pound depreciated to $2

Using the same exchange rates, calculate the cost in pounds of US exports to the Uk costing 10$

If the pound = $1.60, how much is $1 worth?