6.3 EXCHANGE RATES AND THE CURRENT ACCOUNT
|
DEFINITION OF A FOREIGN EXCHANGE RATE
DETERMINATION OF FOREIGN EXCHANGE RATES IN THE GLOBAL FOREIGN EXCHANGE MARKET CAUSES OF FOREIGN EXCHANGE RATE FLUCTUATIONS CONSEQUENCES OF FOREIGN EXCHANGE RATE FLUCTUATIONS FLOATING AND FIXED EXCHANGE RATES |
|
ACTIVITY ONE: Find the current FOREX exchange rates for the following currencies:
US$1 to EUROS US$1 to Indian Rupees Rs US$1 to UAE dirham Dh US$1 to Argentine peso US$1 to Egyptian pounds US$1 to UK pounds |
|
ACTIVITY TWO: Use the following website to analyze the rate of exchange between the US dollar ($) and the Argentine Peso (AP$). Answer the following questions:
1. How many PESO's will 1 US$ buy today on the Foreign Exchange Market (FOREX)? 2. How many would it buy 1 week ago? 3. A month ago? 4. A year ago? 5. Over this period of time has the $ become more valuable against the PESO or less valuable? 6. Did the dollar appreciate or depreciate over this time period against the PESO? 7. In your groups identify causes that may have affected the rate of exchange between these two currencies (try to identify 5 reasons) |
| exchange_rate_game.pptx |
Past paper style questions:
| foreign_exchange_rates.pdf |
Foreign exchange rate diagrams
|
|
ACTIVITY 3: Fixed and floating exchange rate systems:
6.4 CURRENT ACCOUNT OF THE BALANCE OF PAYMENTS
Describe the different components of the current of the balance of payments including trade in goods, trade in services, primary income and secondary income.
Use data on international transactions to calculate deficits and surpluses on the current account of the balance of payments and its component sections.
Analyse the reasons why deficits and surpluses occur.
Discuss the impact of a deficit or a surplus on an economy including on GDP, employment, inflation and its foreign exchange rate.
Analyze the range of policies available to a government to achieve balance of payments stability and how effective they might be.
Use data on international transactions to calculate deficits and surpluses on the current account of the balance of payments and its component sections.
Analyse the reasons why deficits and surpluses occur.
Discuss the impact of a deficit or a surplus on an economy including on GDP, employment, inflation and its foreign exchange rate.
Analyze the range of policies available to a government to achieve balance of payments stability and how effective they might be.
INTRODUCTION: Each year countries major world economies produce and sell billions of dollars of goods and services to each other. Goods and services that are produced and sold to foreigners are called exports and those that are bought from foreigners are called imports. The follows should equal 0, otherwise a trade deficit or surplus is said to exist. You will consider the consequences of these and possible solutions to balance the current account.
ACTIVITY 1: Image gallery
a.) Distinguish which items are credits and which are debits for each party (country). Can they be further divided into types of international transactions?
|
b.) How is the current account calculated?
|
c.) How can a depreciation of the exchange rate help resolve a current account deficit?
|
|
Assessment: Complete the Crossword below and then complete the Kognity on the Current Account.
|
| current_account_balance_of_payments_39.pdf |