Learning objectives
Explain how a floating exchange rate is determined by the demand for and supply of a currency, and define appreciation and depreciation
Analyse the causes of changes in a floating exchange rate: trade flows, inward and outward investment, remittances, speculation, relative interest rates, relative inflation and relative growth rates
Evaluate the consequences of currency appreciation and depreciation for inflation, growth, unemployment, the current account and living standards
Explain how fixed and managed exchange rates are maintained through central bank intervention, and distinguish devaluation and revaluation from depreciation and appreciation
(HL) Compare the advantages and disadvantages of fixed, floating and managed exchange rate systems
Calculate the value of one currency in terms of another and the effect of an exchange rate change on the prices of exports and imports
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