Exchange Rates - Student Handout

I am discussing the macroeconomic effects of exchange rate movements with my AS students this week.

The suddeness and severity of the recent depreciation of sterling, both against the US dollar and the Euro as well as on a trade weighted basis provides plenty of ammunition for a good lesson which seeks to develop their understanding of the transmission mechanism of exchange rate fluctuations together with a chance to develop their evaluation skills. I have made the AS macro student handout available for download below - it contains up to date charts on sterling together with a short exercise for students on how different stakeholders might be impacted by a sterling depreciation.

Student handout Effects_of_Exchange_Rate_Movements.doc

Each of the following groups might be affected by exchange rate movements

UK farmers
British farmers are in receipt of CAP subsidies which are fixed annually and paid in Euros at an exchange rate set at the level in September 2008.

Publishers
Pearson is a multinational publisher which marks school tests, produces learning materials and publishes the Financial Times and Penguin books. The group generates 60% of its sales in American dollars. The exchange rate has moved from $2 to the pound in 2007 to $1.44 at the 2008 year-end.

Tourism
Bed and breakfast businesses in London

A glass manufacturer
NJ Bradford is a business based in the West Midlands which supplies glass across a number of industries. Their main competitors come from China offering cheaper decorative and toughened glass products.

Abattoirs in the Republic of Ireland
In the Republic of Ireland, more than 60 per cent of all food products are exported.

A UK airline
That buys most of its fuel from the international petroleum markets and pays in US dollars.

Estate agents selling prime London property

British people living in France and Spain on sterling pensions