Do we want a weak pound?

The pound has slid to its lowest level against the Euro since April. This is ether a good or bad thing, depending on which newspaper you read this morning. The Daily Mail has focused on misery for holidaymakers as they are only being offered 98 cents for their pound at Birmingham airport. The Telegraph strikes a more upbeat note by recognising a weak pound could transform Britain’s current account deficit and push it into surplus for the first time in living memory. These two articles are brilliant for a lesson on the effect of a weak currency on an economy. Click read more for some exam style questions on exchange rates.

What is meant by an exchange rate? (2)

Explain how exchange rates are determined. (4)

If the £ falls in value against the euro, explain how this will affect UK tourists
who visit Spain. (2)

If the £ falls in value against the euro, explain how this will affect the UK
balance of payments on current account. (3)